YTL Starhill Global REIT - DBS Research 2016-04-25: Still watching for Toshin’s review

YTL Starhill Global REIT - DBS Research 2016-04-25: Still watching for Toshin’s review STARHILL GLOBAL REIT P40.SI 

YTL Starhill Global REIT - Still watching for Toshin’s review 

  • 3QFY16 DPU flat, despite contribution from new asset Myer Centre Adelaide. 
  • Weaker occupancy at Wisma and depreciation of MYR vs SGD dragged performance. 
  • Toshin rent review in June 16 presents upside to DPU; bull-case scenario implies a further 5% boost. 
  • Maintain BUY with 12% total return to our S$0.84TP.

BUY for high income visibility from master leases. 

  • We like SGREIT due to its diversified portfolio of prime retail and office assets located in the Asia Pacific region. 
  • With c.44% of top line derived from master leases or long leases, the REIT offers investors income stability and visibility, as well as upside potential from positive rental reversions embedded in the master leases. 

Negative reversions at Wisma, but income impact is minimal 

  • Wisma Atria (Singapore)’s occupancy has dropped to 96.8% from 100% a year ago. This is largely due to tenant mix reconfiguration and the renovation at Isetan since April 2015. 
  • We understand that the Manager is looking to potentially convert level 1 from Fashion into F&B-focused, which would consist of stickier tenants but may yield lower rents. This is expected to drive higher footfalls for the floor going forward. 
  • We estimate that the overall impact will be minimal as level 1 of Wisma is estimated to only account for 0.9% of the total portfolio revenue. 

Upside from Toshin rent review is a near term catalyst. 

  • We believe that the upcoming rent review for the Toshin lease at Ngee Ann City is a near-term catalyst as Toshin accounts for c.19% of top line in FY16F. 
  • The rent review mechanism only allows for upward adjustment in rents, capped at 25%. This implies that the REIT’s earnings growth profile is projected to grow at a steady 2-3% in the coming two years. 


  • We have a DCF-derived TP of S$0.84. At its current price, Starhill Global REIT offers investors dividend yield of 6.5-6.7% for FY16-17, and a total return of 12%. 
  • Maintain our BUY call. 

Key Risks to Our View: 

  • Upside risk from AUD and MYR currency appreciation. We estimate that c.34% of NPI is derived from assets in Malaysia and Australia; an appreciation of any of these currencies against the SGD would present upside to our estimates.

Derek Tan DBS Vickers | Mervin Song DBS Vickers | 2016-04-25
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.84 Same 0.84