STARHILL GLOBAL REIT (SGX:P40U)
Starhill Global REIT - Uncertainties Galore
- 3QFY20 income available for distribution -4.1%.
- Rental rebates dished out.
- Australia situation a key overhang.
Starhill Global REIT's 3QFY20 results in-line with our expectations
- Starhill Global REIT (SGX:P40U) reported its 3QFY20 results which met our expectations.
- Gross revenue and NPI fell 8.9% and 11.1% y-o-y to S$46.7m and S$35.2m, respectively. This was largely driven by lower income contributions given the AEI at Starhill Gallery in Malaysia, rental assistance extended to eligible tenants in Singapore, Malaysia and China to cushion the impact of the COVID-19 pandemic, coupled with the depreciation of the AUD against the SGD.
- Income available for distribution declined 4.1% y-o-y to S$24.0m, but no DPU was declared in 3QFY20 as SGREIT had changed its distribution frequency to semi-annual distributions.
- For 9MFY20, income available for distribution fell 2.5% to S$74.5m and this accounted for 72.7% of our full-year forecast.
Supporting its tenants with rental rebates across most markets
- As at 31 Mar 2020, ~S$2.1m of rental rebates have been disbursed to tenants, with the remaining S$11.6m to be given subsequently, of which S$10.8m would come from the property tax rebate to be received from the Singapore government.
- Given the extension of the ‘circuit breaker’ period, we expect further rental rebates to be given by Starhill Global REIT to its retail tenants in Singapore.
- For Starhill Global REIT’s overseas markets, we understand that rental collection in Australia for the month of Apr has been very sluggish, as tenants are demanding rental rebates from landlords and both parties are awaiting further clarity from the Australian government’s new Mandatory Code of Conduct. Australia contributed 18.1% of Starhill Global REIT’s NPI for 9MFY20.
- Although some of Starhill Global REIT’s properties are under master leases, the severe and widespread impact of COVID-19 has resulted in management extending, or having the intention to extend some form of rental rebate to its master lessees to share the pain and build a stronger longer-term relationship.
Cut forecasts and DPU to S$0.52 in light of uncertainties and lack of earnings visibility
- In terms of financial position, Starhill Global REIT’s gearing ratio stood at 36.7%, and it only has S$55m and S$100m of debt maturing in 4QFY20 and FY21, respectively.
- We factor in further rental rebates across Starhill Global REIT’s major markets, and also incorporate a weaker AUD assumption and declines in rental and occupancy rates for its properties which are not on master leases. As such, our FY20F and FY21F DPU forecasts are cut by 18.2% and 18.8%, respectively.
- Given the significant uncertainties and lack of earnings visibility ahead, we raise our cost of equity assumption from 7.4% to 8.8% and lower our terminal growth rate from 1.5% to 0.5%. Consequently, our fair value dips from S$0.81 to S$0.52.
- See Starhill Global REIT Share Price; Starhill Global REIT Target Price; Starhill Global REIT Analyst Reports; Starhill Global REIT Dividend History; Starhill Global REIT Announcements; Starhill Global REIT Latest News.
OCBC Research Team
OCBC Investment Research
|
https://www.iocbc.com/
2020-04-30
SGX Stock
Analyst Report
0.52
DOWN
0.810
