Starhill Global REIT - RHB Invest 2016-08-02: 4QFY15/16 Results Flash Note

Starhill Global REIT - RHB Invest 2016-08-02: 4QFY15/16 Results Flash Note STARHILL GLOBAL REIT P40.SI 

Starhill Global REIT - 4QFY15/16 Results Flash Note

  • We maintain our BUY rating, forecast and DDM-derived TP (CoE: 7.4%, Tg: 1.0%) of SGD0.84, FY16/17 dividend yield of 7.0%.


  • 4Q16/FY16 results came inline with our expectations with full year DPU of 5.18 S cents (+1.4% YoY) accounting for 95% of our estimates. FY16 Gross revenue and Net Property Income (NPI) rose 11.4% and 6.9% respectively on the back of contributions from its newly acquired Myer Centre Adelaide (May 2015).
  • In terms of geographical performance, NPI from Singapore for FY16 rose marginally by 0.6% YoY on the back of positive reversions and Australia rose 89.1% YoY due to contributions from its newly acquired Myer Centre. Full year NPI contribution from Malaysia declined 11.9% YoY due to depreciation of MYR and reversal of excess provision of property tax in the comparative period last year. China mall(Chengdu) saw NPI decline of 39.0% YoY due to softening retail market and increased competition.
  • Gearing remains stable at 35% with nearly 99.6% of its fixed and a weighted average debt maturity of 3.1years. The overall borrowing costs currently stands at 3.09%.
  • The Group recorded revaluation gains of SGD 71m for the year mainly from higher valuations for Ngee Ann City(SGD 61.0m) and Australia Properties (SGD19.4m).

Key takeaways

  • The Group renewed Toshin master lease in Ngee Ann City in June 2016 and managed to secure a 5.5% increase in the base rent. Key to note is that Toshin master lease accounts for nearly 20% of portfolio gross rents. Ngee Ann City (Retail) continued to retain 100% occupancy as at end FY16.
  • Wisma Atria(Retail) saw a negative rental reversion of 4% during 4QFY16 due to a replacement of an IT tenant with an F&B tenant. Overall shoppers traffic increased 2.5% YoY during the quarter while tenant sales declined 2.5% YoY. Occupancy costs for tenants stood at 29%. SGREIT has signed two new F&B tenants Joe and the Juice and Picnic which will be opening in Aug & Nov 2016 respectively.
  • The Group managed to achieve positive reversion of 3.5% for its Singapore office leases renewed in 4QFY16. However portfolio occupancy declined 3.6ppt to 95.6% as some Oil & Gas tenants moved out.
  • Overall Portfolio occupancy dipped 3ppt to 95.1% as at 30th Jun due to lower occupancy in Singapore (97.9%), China (96.4%) and Australia (89.7%) properties. Weighted Average Lease Term (WALE) remains one of the longest among S-REITs with 7.1 years and 5.1 years in-terms of NLA and gross rents respectively. About 8.4%/10.7% of portfolio leases by NLA is expiring in FY17/18 respectively.

Our View

  • We like Starhill Global REIT for its long master leases and a relatively resilient and diversified retail portfolio. Maintain BUY with a TP of SGD0.84.

Vijay Natarajan RHB Invest | http://www.rhbinvest.com.sg/ 2016-08-02
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.84 Same 0.84