Starhill Global REIT - OCBC Investment 2016-08-01: Stable DPU but some softness in occupancy

Starhill Global REIT - OCBC Investment 2016-08-01: Stable DPU but some softness in occupancy STARHILL GLOBAL REIT P40.SI 

Starhill Global REIT: Stable DPU but some softness in occupancy

  • 4QFY16 DPU flat YoY at 1.29 S cents.
  • Portfolio occupancy fell to 95.1%.
  • 3.5% rental reversions for Singapore office.

4QFY16 results in-line with expectations

  • Starhill Global REIT’s (SGREIT) 4QFY16 gross revenue rose 3.6% YoY to S$53.6m, driven by a full quarter contribution from Myer Centre Adelaide (MCA) which was acquired in May 2015, but partially offset by weaker performance from its Wisma Atria Property and remaining overseas properties. 
  • DPU of 1.29 S cents was similar to the same period last year. 
  • Results were in-line with our expectations. 
  • On a full-year basis, SGREIT’s gross revenue and DPU grew 11.4% and 1.4% to S$219.7m and 5.18 S cents as compared to the 12 months period ended 30 Jun 2015, and formed 98.2% and 98.6% of our FY16 forecasts, respectively.

Weaker occupancy from Singapore and China

  • During the quarter, SGREIT registered a 0.5 ppt QoQ dip in its portfolio occupancy to 95.1%. This was largely attributed to higher vacancies for its Singapore office portfolio and China. 
  • Nevertheless, management secured positive rental reversions of 3.5% for its Singapore office leases committed in 4QFY16. On its retail front, Wisma Atria’s committed occupancy increased from 96.8% (as at 31 Mar 2016) to 97.7% as new tenants and concepts were introduced. The mall is currently still undergoing tenant mix reconfiguration. Shopper traffic grew 2.3% YoY, although tenant sales fell 2.5% YoY in 4QFY16. 
  • We expect the situation at Wisma Atria (Retail) to improve ahead, as Isetan’s strata-owned space at the property has progressively reopened for operations after its renovation works since Apr last year. Isetan recently launched Japan Food Town at the mall, a collection of 16 casual dining establishments handpicked from Japan.

Maintain BUY

  • In terms of financial position, SGREIT’s balance sheet remains healthy, with a comfortable gearing ratio of 35.0%, as at 30 Jun 2016 (-0.4 ppt QoQ). 99.6% of its borrowings are fixed/hedged. 
  • We reiterate our BUY rating on SGREIT, but with a higher fair value estimate of S$0.86 (previously S$0.84) as we lower our risk- free assumption from 3.0% to 2.4% and also roll forward our valuations.

Wong Teck Ching Andy CFA OCBC Securities | 2016-08-01
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 0.86 Up 0.84