Starhill Global REIT - Maybank Kim Eng 2015-10-28: Aussie Rules

Starhill Global REIT - Maybank Kim Eng 2015-10-28: Starhill Global REIT STARHILL GLOBAL REIT P40.SI 

Starhill Global REIT - 

  • 3Q15 in line. Strong showings in Australia and Singapore offset weakness in Malaysia and China. 
  • Still cautious on Singapore retail as reversions, shopper traffic & tenant sales are expected to fall this year. 
  • Maintain HOLD with TP bumped from SGD0.71 to SGD0.74 on 2-4% higher DPU, still at 7.5% yield target. Still our preferred retail REIT on recent acquisitions & master lease renewals. 

What’s New 

  • 3Q was a strong quarter as expected. Myer Centre Adelaide had its first full quarter and Wisma Atria topped our expectations. 
  • Revenue and NPI grew 16.8% YoY (9.6% QoQ) and 10.2% YoY (5.6% QoQ), while DPU improved 3.1% YoY (1.6% QoQ). 
  • Australia NPI surged 113% YoY to SGD8.6m due to Myer. In Singapore, Wisma’s retail NPI rose 5.6% YoY to SGD11.5m as occupancy ramped up from 98.1% to 100%. 
  • Committed rent reversions of c.8.6% in 1H also kicked in. However, management guided that committed reversions signed in 3Q fell 7.7%, as it tried out new fashion/F&B concepts. It continues to see a difficult retail environment, especially for the fashion industry. Shopper traffic and tenant sales fell c.6.1% and c.4.9% for the year. 
  • Malaysia and China NPI declined 16% YoY and 27.5% YoY respectively, due to MYR depreciation and severe competition in Chengdu. 

Top retail REIT pick 

  • Starhill remains our preferred exposure to retail REITs owing to its clear DPU growth path from: 
    1. Myer (11% NPI), plus a potential 23% increase in NLA from AEI; and 
    2. three master leases - Ngee Ann, Lot 10, Starhill Gallery at 38% NPI - up for renewal in Jun 2016. 
  • We raise DPU by 2-4% to accommodate Wisma’s strong showing. 
  • Applying our unchanged 7.5% yield target to FY16 DPU, our TP climbs from SGD0.71 to SGD0.74. Maintain HOLD in view of a generally difficult retail environment.


Joshua Tan Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-10-28
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 0.74 Up 0.71


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