Starhill Global REIT - Maybank Kim Eng 2016-04-12: Decent DPU growth, but upside in the price

Starhill Global REIT - Maybank Kim Eng 2016-04-12: Decent DPU growth, but upside in the price STARHILL GLOBAL REIT P40.SI 

Starhill Global REIT (SGREIT SP) - Decent DPU growth, but upside in the price 


Factoring in favourable FX and yield compression 

  • SGREIT’s 2016-18 DPU growth of 6.5%/2.9%/2.9% should be in the bag with upcoming rent reviews and Myer Centre Adelaide’s full year contribution. 
  • We also tweaked DPUs 0.5%/0.8%/0.8% higher as the MYR, AUD, and JPY have appreciated against the SGD. 
  • The upside is however in price, even as we compress SGREIT’s yield target to 7% (7.5% previous), the mid-point between the -1SD and the mean (in line with peers), on account of fallen bond yields globally. 
  • Applied to 2016 DPU revises TP +5% to 79 Scts. Maintain HOLD. 

Challenging Orchard, but visitor arrivals up! 

  • Although Orchard assets Wisma and Ngee Ann City continue to contribute positively, underlying operating metrics at Wisma does raise concerns. Occupancy there took a sharp dip to 94.9% in 4Q15 (3Q15:100%). Rent reversions have also been weakening past four quarters: 13.3%/3.9%/ -7.1%/0%. 
  • Our forecasts already do take into account the tough market, factoring in 0% rent reversions for three years. For occupancy we still expect it to revert back to full due to the prime location of the asset, and the fact that management has guided that it is likely to fill the space with a new F&B concept. 
  • There is upside risk to our numbers as visitor arrivals have been steadily climbing. 

Growth from Myer, and upcoming rent reviews 

  • No change to our view that DPU growth ahead should be powered mainly by the rent reviews at the master leases and Myer Centre Adelaide’s full year contribution. 
  • Strengthening visitor arrivals is a positive development for Ngee Ann City’s upwards-only rent review in June 2016. 
  • KL assets master leases are also due for renewal in June, and the recovering MYR will positively impact the bottom line.




Joshua Tan Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-04-12
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 0.79 Up 0.75


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