STARHILL GLOBAL REIT (SGX:P40U)
Starhill Global REIT - Heading To A Recovery
- Starhill Global REIT’s 9MFY6/21 NPI of S$100.4m (-8.1% y-o-y), came in line with our forecast.
- Despite the weaker y-o-y 9MFY21 performance, 3QFY21 q-o-q performance improved due to lower rental rebates given.
- Reiterate ADD on Starhill Global REIT at a higher target price as we roll over our valuation to FY22F.
- Starhill Global REIT is trading at an attractive DPU yield of > 7%.
Starhill Global REIT reported weaker 9MFY21 NPI mainly due to rental rebates
- Starhill Global REIT (SGX:P40U)’s (SG REIT) 9MFY21 revenue declined 6% y-o-y to S$134.8m, while NPI was down 8.1% y-o-y to S$100.4m (in line at 75.6% of our full-year NPI forecast). The declines were mainly due to the rental rebates given in 1HFY21.
- 3QFY21 revenue declined 0.6% y-o-y (NPI +0.7% y-o-y), but increased 2.4% on a q-o-q basis; 3QFY21 NPI was also up 0.6% q-o-q, due to lower rental rebates provided to tenants.
Relatively stable occupancy
- Starhill Global REIT’s portfolio actual occupancy declined slightly from 96% in 1HFY21 to 95.5% in 3QFY21. The weaker occupancy was due to the decline of occupancy in its Singapore retail portfolio (-0.8% points q-o-q to 95.2%) and Australia portfolio (-0.8% points q-o-q to 93.7%). However, committed occupancy for Singapore retail remained high at 98.3%.
- Starhill Global REIT’s assets in Japan, China and Malaysia remained fully occupied, largely supported by single tenant (China)/master leases (Malaysia).
- Tenant sales and shopper traffic at Wisma Atria saw significant improvement in 3QFY21 — tenant sales recovered to 83.4% of 3QFY20’s level (vs. ~70% in 2QFY21). Shopper traffic in 3QFY21improved to 74.2% of 3QFY20’s level (vs. 50-60% in 2QFY21).
AEIs to rejuvenate portfolio for long-term growth
- Interior upgrading works to rejuvenate Wisma Atria in Singapore have commenced, with completion estimated by end-2022. Wisma Atria will remain fully operational throughout the AEI and continues to attract new tenants, while Lot 10 in Malaysia secured the first outlet of Don Don DonKi in Malaysia. At The Starhill Malaysia, AEI is in progress, with expected completion by Dec 2021, after which, the REIT would get an uplift in rent from the master lessee.
Reiterate ADD, at a higher DDM-based Target price of S$0.68
- We reiterate ADD on Starhill Global REIT and increase our target price to S$0.68 as we roll over our valuation to FY22F.
- While the operating environment remains weak, the improving tenant sales and shopper traffic points towards a recovery. We believe the return of more office crowds will drive its shopper traffic and tenant sales higher, which, in turn, would stabilise rental reversions. Rental rebates are expected to be low and given on a targeted basis.
- Starhill Global REIT is trading at a > 7% dividend yield (-1 s.d. to its 5-year mean). More than 50% of its revenue is from long lease structures, which will underpin income stability.
- See
- 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
2021-04-26
SGX Stock
Analyst Report
0.683
UP
0.660
