Starhill Global REIT - RHB Invest 2015-10-28: Well-Supported By Its Australian Asset

Starhill Global REIT - RHB Invest 2015-10-28: Well-Supported By Its Australian Asset STARHILL GLOBAL REIT P40.SI 

Starhill Global REIT - Well-Supported By Its Australian Asset

  • Starhill Global REIT’s 1QFY15/16 results were in line, as it announced DPU growth of 3.1% YoY, meeting c.25% of our full-year estimate. 
  • We reiterate BUY, with a DDM-derived TP of SGD0.93 implying an upside of 16.3%. 
  • The results were mainly well-cushioned by the recently-acquired Myer Centre Adelaide, while the performance of its core Singapore portfolio remained robust. 


 Results in line. 

  • Starhill Global REIT’s 1QFY15/16 results were within our expectations as its distribution per unit (DPU) of 1.31 cents met c.25% of our full-year estimate. It reported increases in distributable income and DPU by 4.5% and 3.1% YoY respectively. The growth was mainly driven by the full-quarter contribution from the recently-acquired Myer Centre Adelaide, and a strong performance from its Singapore portfolio. 
  • The REIT’s borrowings are fully hedged, while its gearing level remained healthy at 35.7% with interest coverage of 4.5x. According to a sensitivity test conducted by the REIT, a 1.0% pa increase on floating rates would have resulted in a -1.3% change in its latest quarter’s DPU. 

 Singapore occupancy levels remain robust, while rental reversion was impacted by a small group of tenants. 

  • On its Singapore portfolio front, occupancy inched up slightly to 99.7%, while retail space was fully occupied. Although a negative rental reversion of 7.3% was registered for its Singapore retail space, we are not overly concerned as: 
    1. leases that are committed accounted for 3% of its retail portfolio’s revenue (this excludes the Toshin master lease at Ngee Ann City Retail), 
    2. these leases were modified to complement new retail concepts, and 
    3. we remain optimistic, as tenant sales increased 1.1% YoY. 

 Maintain BUY, with an unchanged TP of SGD0.93. 

  • We remain optimistic on the REIT’s long-term growth plans, which include projects like the AUD10m redevelopment plan to optimise the upper-storey space at Plaza Arcade – it is currently in discussions with prospective anchor tenants on this matter. 
  • In addition, there is also potential for leasable area to be expanded (~100,000 sq ft) when Wisma Atria is linked up with the new Thomson Line Orchard MRT in 2021. 
  • Reiterate BUY with an unchanged TP of SGD0.93.


Ivan Looi RHB Research | Ong Kian Lin RHB Research | http://www.rhbinvest.com.sg/ 2015-10-28
RHB Research SGX Stock Analyst Report BUY Maintain BUY 0.93 Same 0.93


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