Starhill Global REIT - UOB Kay Hian 2016-01-27: 2QFY16 In Line With Expectations

Starhill Global REIT - UOB Kay Hian 2016-01-27: 2QFY16 In Line With Expectations SUNTEC REIT SUNTEC REAL ESTATE INV TRUST T82U.SI 

SGREIT SP/BUY/S$0.73/Target: S$0.91

Results in line. 

  • Starhill Global REIT (Starhill) reported 2QFY16 DPU of 1.32 S cents, (+2.3% yoy). 
  • Revenue rose 13.8% yoy, driven by contribution from Myer Centre Adelaide and the resilience of the Singapore portfolio performance, but these were partially offset by lower contributions from Renhe Spring Zongbei property and net foreign currency movements. 
  • The results were in line with expectations, coming in at 101% of full-year estimates. 

• Operational highlights. 

  • Singapore retail rent reversion was flat while offices saw positive rental reversions of 1.7% for leases committed respectively during the quarter. 
  • Overall occupancy showed a minor 20bp drop to 98% in 2QFY16. 
  • Gearing remained stable at 35.7% (1QFY16: 35.7%) with borrowing costs flat at 3.15%. 
  • Across the portfolio, about 33.7% of leases by NLA (19.4% by gross rent) are due in FY16. 

• Watch out for Toshin rent review in Jun 16. 

  • Wisma Atria tenant sales inched down 1% yoy during the quarter, while shopper traffic decline eased to 2.5% yoy from 9.7% yoy decline in previous quarter due to closures from Isetan’s renovations. 
  • New tenant offerings Seed Heritage, Sans & Sans and Southhaven are expected to bolster shopper traffic. Paris Baguette completed its renovation in Nov 15. 
  • Ngee Ann City (retail) maintained full occupancy. Expect positive rent reversion from the Toshin masterlease that is due for review in Jun 16. 

• Limited office supply in Orchard road saw stable leasing demand for the Singapore office portfolio. 

  • The Singapore office portfolio NPI increased 3.4% yoy in 2Q FY15/16 with 1.7% positive rental reversion seen for leases committed during the quarter. 
  • Wisma Atria and Ngee Ann City offices were fully occupied as at Dec 15. Of the 21.2% of office leases due for expiry in FY15/16 by gross rent, about 40% have been committed. 

• Recovery in Chinese arrivals softened the blow dealt by absent Indonesians. 

  • The 19.3% ytd spike in Chinese tourist arrivals (as of Aug 15) was ameliorating in light of the continued weakening in Indonesian arrivals (-11.2% ytd in 8M15). 
  • As overall numbers recovered 7.9% and 6.0% yoy respectively in July and August, this led to an overall dip of 0.6% ytd in tourist arrivals. 
  • Indonesians and Chinese visitors made up 17.8% and 14.3% of total tourist figures in 8M15. 

• Extending overseas footprint. 

  • NPI from Australia jumped 122% yoy to S$8.6m during the quarter, boosted by contribution from Myer Centre Adelaide (acquired in May). Australia now accounts for 16% of total portfolio asset value and 23% of its revenue. 
  • The slowdown in Singapore could lead to more foreign acquisitions. 
  • We estimate SGREIT’s debt headroom at S$227.6m (40% gearing assumed).

Vikrant Pandey UOB Kay Hian | Derek Chang UOB Kay Hian | 2016-01-27
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