Starhill Global REIT - RHB Invest 2016-01-28: Records a Set Of Resilient Results

Starhill Global REIT - RHB Invest 2016-01-28: Records a Set Of Resilient Results STARHILL GLOBAL REIT P40.SI 

Starhill Global REIT (SGREIT SP) - Records a Set Of Resilient Results 

  • Starhill recorded a set of resilient results, while we identified short- and long-term catalysts for the counter. 
  • We maintain BUY with a lower TP of SGD0.84 (from SGD0.93, 15% upside) implying 0.93x FY15 (Jun) P/BV. 
  • Its results were within our expectations, as its overall portfolio remained almost fully occupied. 
  • We think that the REIT’s upcoming master leases rental review could potentially be a short-term catalyst. 

 Resilient numbers in line with our expectations. 

  • Starhill Global REIT (Starhill) booked resilient earnings that met c.48% of our full-year estimate. 
  • 2QFY16/6MFY16 distribution per unit (DPU) rose about 2%/3% YoY, underpinned by c.10% stronger net property income (NPI) for the quarter – mainly driven by the contribution from its latest acquisition, ie a mall in Adelaide, Australia. 
  • Its gearing level remained healthy at 35.7%, with no significant debt refinancing requirement kicking in until 2018. 

 Stable portfolio performance with near-term catalysts. 

  • The REIT’s overall occupancy remained high at 98.0%, while its Singapore assets are almost fully occupied. 
  • In addition, we think that there are limited downside risks, as the next rental review for the master lease with Toshin Development Singapore is in June. 
  • Its master lease with Katagreen Development will be up for renewal in June this year, too. These, we think, would provide a near-term catalyst for Starhill. 

 Strategy moving forward. 

  • We would describe Starhill’s strategy as opportunistic. 
  • Despite divesting a Japanese asset earlier this month, Starhill remains interested in both the Japan and Australia markets. However, management has mentioned that competition is tough in these markets. 
  • Meanwhile, in Singapore, the REIT is looking at potentially expanding its leasable area when Wisma Atria is linked to a new mass rapid transit (MRT) station. 

 Maintain BUY with a lower TP of SGD0.84. 

  • We continue to like Starhill as we still see catalysts for both the short and long terms. 
  • We trim our TP to SGD0.84 as we lift our cost of equity assumption by 50bps to 7.4%. 
  • The key risk to our estimates would be flattish upward rental review with master leases.

Ivan Looi RHB Research | http://www.rhbinvest.com.sg/ 2016-01-28
RHB Research SGX Stock Analyst Report BUY Maintain BUY 0.84 Down 0.93