Starhill Global REIT - DBS Research 2020-12-09: Bright Spots In Australia


Starhill Global REIT - Bright Spots In Australia

  • An additional S$7.3m in rebates extended in the quarter; relief negotiations with Australian tenants mostly concluded.
  • Wisma Atria tenant sales and shopper traffic at 67% and 46% of pre-pandemic levels respectively.
  • Australia retail data trended above pre-COVID levels in August 2020.
  • Maintain HOLD on Starhill Global REIT with higher target price of S$0.55.

Starhill Global REIT's 1QFY20/21 Operational Update

Double-digit declines in revenue and NPI given additional rebates extended for the quarter

  • Starhill Global REIT (SGX:P40U)'s Revenue and NPI for 1QFY20/21 declined 10.3% and 19.2% y-o-y to S$43.1m and S$29.8m respectively.
  • This was mainly due to additional rental assistance extended to affected tenants, mainly for the Australia properties, and was partially offset by higher contributions from The Starhill and a stronger AUD.
  • An additional rental rebate of S$7.3m was extended to tenants in 1QFY20/21, on top of the total relief of S$32.2m provided in FY19/20.
  • Most of the additional rebates were likely extended to Australian tenants in the past quarter.
  • We recap that Starhill Global REIT retained S$4.9m of income in 4QFY19/20 and deferred S$7.7m of distributable income to this financial year.

Encouraging traction in overall portfolio occupancy; bright spots in overseas retail sales

  • Starhill Global REIT’s portfolio occupancy increased 4ppts q-o-q to 96.6%, primarily led by leasing momentum within the Singapore retail (+0.6ppt q-o-q) and Singapore office (+2.7ppts q-o-q) segments.
  • Wisma Atria’s tenant sales and shopper traffic recovered to about two-thirds (66.5%) and half (45.6%) of pre-pandemic levels on a y-o-y basis.
  • Australia tenant sales (Perth assets) matched pre-COVID levels in 1QFY20/21, and the manager has concluded most of the rental assistance negotiations with the Australian tenants.
  • Retail sales for South Australia and Western Australia grew by 4.8% and 7.5% y-o-y respectively in August 2020.
  • In Malaysia, retail trade figures trended closer towards pre-COVID levels at just a 1.5% y-o-y decline in August 2020 (3.8% y-o-y decline in July 2020).

Delays for asset enhancement works at The Starhill

  • The completion of The Starhill has been delayed due to Malaysia’s movement control order.
  • Initial completion scheduled for October 2021 will now be deferred to December 2021.
  • Rental rebate extended by sponsor which approximates to 50% of annual rents of RM52m during the first two years of construction will also continue for a corresponding two months.
  • Post completion end of next year, the master lease arrangement will build in greater income visibility, with rents estimated to be 1.5% higher and periodic rental escalations of 4.75-6.0% at every three-yearly views.


Singapore retail REIT sector report:

Geraldine WONG DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2020-12-09
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.55 UP 0.500