‘More stable business outlook’ for Starhill Global REIT

SINGAPORE (Aug 2): Religare is reiterating its “buy” call on Starhill Global (SGREIT) with an unchanged target price of 90 cents, with the view that its portfolio’s performance is set to stabilise.

SGREIT recently announced a FY16 revenue of S$219.7 million (RM661.8 million), net property income (NPI) of S$170.3 million, as well as a DPU of 5.18 cents — all of which match Religare’s forecast.

In a Tuesday report, analyst Pang Ti Wee notes that the REIT’s growth in revenue and NPI at 11.4% and 6.9% respectively, was due to the contribution of its newly-acquired Australian asset, but these were partially offset by the “weak performance of Singapore assets and a strong Singapore dollar”.

“Singapore retail assets continue to show weakness, especially Wisma Atria which recorded a 4.1% y-o-y drop in revenue and a 3.8% drop in NPI in 4Q16,” he details, pointing out that the q-o-q numbers for the said categories, however, were actually flattish.

Adding that the REIT also managed to secure positive rental reversion for the master leases in Nee Ann City and the Malaysia property effective from June, the analyst believes the portfolio’s performance will stabilise in time to come.

Cap rates used to value both Wisma Atria and Ngee Ann City also expanded slightly from the previous 5% at 5.15 and 5.1% respectively, a result of shorter remaining property leases and weak retail market conditions, according to Ti.

“SGREIT currently offers a FY17E yield of 6.7% which is still the highest among retail REITs,” Ti observes. “This, coupled with a more stable business outlook, should support a continued rebound in share price.” — theedgemarkets.com.sg

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