Starhill Global REIT - OCBC Investment Research 2015-10-28: Full quarter contribution from Myer Centre Adelaide

Starhill Global REIT - OCBC Investment Research 2015-10-28: Full quarter contribution from Myer Centre Adelaide STARHILL GLOBAL REIT P40.SI 

Starhill Global REIT - Full quarter contribution from Myer Centre Adelaide

 1QFY16 DPU rose 3.1% YoY
 Negative rental reversion at Wisma Atria retail
 No change to forecasts, FV and rating


1QFY16 results within our expectations 

  • Starhill Global REIT (SGREIT) reported its 1QFY16 results which met our expectations. 
  • Gross revenue jumped 16.8% YoY to S$56.8m, as a full quarter contribution from its Myer Centre Adelaide acquisition and stronger performance from its Singapore portfolio was partially offset by weakness from its assets in Malaysia and China. 
  • DPU grew 3.1% to 1.31 S cents. 
  • SGREIT’s overall portfolio occupancy remained stable at 98.3% (+0.1 ppt). 
  • A blip during the quarter came from the negative 7.3% rental reversion recorded at Wisma Atria (retail). This was largely to accommodate a new tenant which would bring a fresh retail concept (fashion boutique cafe) to the mall. Nevertheless, we note that the leases committed in 1QFY16 accounted for less than 3% of Wisma Atria (retail)’s revenue. 
  • We maintain our BUY rating and S$0.93 fair value estimate on SGREIT, as we like the stock for its healthy valuations (FY16F distribution yield of 6.7% and P/B ratio of 0.88x). 


1QFY16 results within our expectations 

  • Starhill Global REIT (SGREIT) reported its 1QFY16 results which met our expectations. 
  • Gross revenue jumped 16.8% YoY to S$56.8m and formed 25.0% of our FY16 forecast. This was underpinned by a full quarter contribution from Myer Centre Adelaide (MCA) which was acquired in May 2015 and stronger performance from its Singapore portfolio, but partially offset by weakness from its assets in Malaysia and China. 
  • Given a 4.6 ppt YoY decline in SGREIT’s NPI margin to 76.8% and higher finance expenses incurred for the acquisition of MCA, SGREIT’s DPU grew at a slower pace of 3.1% to 1.31 S cents. This constituted 24.4% of our full-year projection. 


Stable occupancy; negative rental reversion at Wisma Atria retail 

  • SGREIT’s overall portfolio occupancy remained stable at 98.3% (+0.1 ppt). A blip during the quarter came from the negative 7.3% rental reversion recorded at Wisma Atria (retail). This was largely to accommodate a new tenant which would bring a fresh retail concept (fashion boutique cafe) to the mall. Nevertheless, we note that the leases committed in 1QFY16 accounted for less than 3% of Wisma Atria (retail)’s revenue. 
  • On a positive note, Wisma Atria (retail)’s committed occupancy improved from 98.1% to 100%, while tenants’ sales increased 1.1% YoY, a reversal from the declines recorded in the past few quarters. However, shopper traffic dipped 9.7%, which we attribute to the impact of the ongoing renovation by Isetan for its strata-owned space. 
  • For SGREIT’s Singapore office portfolio, positive rental reversions of 3.5% were achieved, and occupancy stood at 99.3%. 


Maintain BUY 

  • We are keeping our forecasts, BUY rating and S$0.93 fair value estimate on SGREIT intact. We like SGREIT for its healthy valuations, with the stock trading at FY16F distribution yield of 6.7% and P/B ratio of 0.88x. 
  • Its financial position also remains strong, with a gearing ratio of 35.7%. 100% of its debt has been fixed/hedged. 
  • Key risks to our estimates include a sharper-than-expected depreciation in the foreign currencies which SGREIT is exposed to (AUD, CNY, JPY and MYR) and a slowdown in the recent recovery in tourist arrivals to Singapore.






Wong Teck Ching Andy CFA OCBC Securities | http://www.ocbcresearch.com/ 2015-10-28
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 0.93 Same 0.93


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