STARHILL GLOBAL REIT (SGX:P40U)
Starhill Global REIT - Attractive Yield Of 7.5%
- Starhill Global REIT's 1HFY20 DPU of 1.88 cents (-17% y-o-y) came in below, at 46% of FY20F DPU.
- Occupancy remained stable and new tenants secured despite pandemic.
- Reiterate ADD. Expect gradual recovery. Starhill Global REIT offers attractive yield of 7.5%.
Weaker 1HFY21 revenue and NPI due to rental rebates
- Starhill Global REIT (SGX:P40U)’s 1HFY20 DPU of 1.88 cents (-17% y-o-y), which include 0.14 cents of income deferred from FY20, came in below, at 46% of our full-year forecast, as we had underestimated its operating expenses.
- Starhill Global REIT's 1HFY21 revenue fell by 8.6% to S$43.1m (48% of our full-year forecast), while NPI declined 12.3% y-o-y to S$65m (45% of our full-year forecast), mainly due to rental assistance to eligible tenants affected by the COVID-19 pandemic, including allowance for rental arrears and rebates for Singapore and Australia properties (~S$9m in 1HFY20). Excluding this S$9m, y-o-y revenue and NPI would have been relatively stable. This was partially offset by the stronger A$ vs S$.
Starhill Global REIT's cccupancy remained stable; tenant sales and footfall recovering
- Starhill Global REIT’s portfolio’s actual occupancy remained stable at 96% in 1HFY21 (vs 96.2% in FY20, 96.5% in 1HFY20). With the exception of retail occupancy in Singapore (-2.9% points q-o-q to 96%), all other assets reported improved occupancy q-o-q. While Singapore’s retail occupancy dropped, committed occupancy remained high at 99.3%.
- Tenant sales/shopper traffic of Wisma Atria Singapore recovered gradually to about two-thirds/half of pre-COVID-19 levels y-o-y in 1HFY21. Wisma Atria continued to attract new tenants.
- In Australia, it managed to lease out unutilised space on Level 4 of Myer Centre Adelaide to an existing tenant who was expanding.
- While The Starhill in Malaysia is still undergoing an asset enhancement initiative (AEI), due for completion in Dec 2021, the REIT has secured a lease with Eslite Spectrum, Taiwan’s renowned lifestyle bookstore chain, as the anchor tenant of the mall; it also brought back existing tenants to the mall.
- Starhill Global REIT's gearing improved from 39.1% as at Sep 20 to 35.8% as at Dec 2020. Starhill Global REIT issued its maiden S$100m perpetual bond at 3.8% to pay down debt and entered into a five-year unsecured S$550m facility, of which a S$250m term loan facility is expected to refinance a S$100m MTN upon maturity in Feb 2021 and a S$150m term loan in FY22. With this, Starhill Global REIT would have refinanced all of its debt in FY21F and 65% of debt in FY22F. 8.8% and 10.7% of its retail and office leases are up for renewal in FY21.
Reiterate ADD; attractive yield
- We tweak our Starhill Global REIT's FY21-23F DPU forecast lower, factoring in higher operating expenses, issuance of perp and redistribution of deferred income from FY20. Despite the lower DDM-based target price, we believe the market has already priced in the COVID-19 impact.
- 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.
- Starhill Global REIT is trading at 0.6x FY20 P/BV (-2 s.d. below mean) and a ~7.5% dividend yield. With less rental rebates expected, we foresee a gradual recovery going forward. ~55% of its revenue in FY20 was from long lease structures, which provided income stability.
- Re-rating catalyst/downside risks: stronger/ weaker-than-expected rental reversions.
EING Kar Mei CFA
CGS-CIMB Research
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LOCK Mun Yee
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-01-29
SGX Stock
Analyst Report
0.66
DOWN
0.706
