Tuesday, July 30, 2013

Starhill Global REIT: Poised for further upside (OCBC)

Starhill Global REIT:
Fair value S$0.95
add: 12m dividend forecast S$0.049
versus: Current price S$0.87

Poised for further upside
• 2Q13 DPU up 10.2% YoY
• Healthy underlying performance
• Clear catalysts for growth

Starhill Global REIT (SGREIT) announced 2Q13 DPU of 1.19 S cents, up 10.2% YoY. Together with 1Q DPU of 1.37 S cents, 1H13 DPU totaled 2.56 S cents, up 19.1% YoY. This forms 52.1%/51.2% of our/consensus full-year DPU forecasts, well within expectations. The positive performance was mainly due to strong contribution from its Singapore and Australia portfolios.
For 2Q, we note that SGREIT’s Singapore portfolio contributed 63.7% of total revenue, largely unchanged from 66.3% in 1Q. Overall occupancy also stayed stable at 99.6%, compared to 99.7% seen in previous quarter. Looking ahead, management believes the new renewal rate (+6.7%) for Toshin lease, 7.2% rental uplift from the Malaysia master leases, and continued repositioning of Wisma Atria will help to bolster SGREIT’s income in 2H13. On its capital management front, SGREIT also expects its debt duration to improve from 1.2 years to 3.5 years and the percentage of its debts fixed/hedged to increase from 81% to over 90%, having secured loan facilities to refinance all its debts due in 2013. We maintain BUY with unchanged fair value of S$0.95 on SGREIT.

In line 2Q13 results
Starhill Global REIT (SGREIT) announced 2Q13 NPI of S$39.1m and distributable income of S$26.7m, up 5.2% and 14.7% YoY, respectively. While the number of units outstanding was enlarged post conversion of 152.7m convertible preferred units (CPUs) into 210.2m ordinary units, income to be distributed to CPU holders declined 88.2% YoY to S$0.3m. As a result, distribution to unitholders was up 22.1% to S$25.6m (S$0.9m retained), while DPU was up 10.2% YoY to 1.19 S cents. Together with 1Q DPU of 1.37 S cents, 1H13 DPU totaled 2.56 S cents, up 19.1% YoY. This forms 52.1%/51.2% of our/consensus full-year DPU forecasts, well within expectations.

Strong numbers from Singapore and Australia portfolios
The positive performance was mainly due to strong contribution from its Singapore and Australia portfolios. Both Wisma Atria (WA) and Ngee Ann City (NAC) benefited from higher occupancies and positive rental reversions (15.1-15.6% increase for office segment and WA retail leases committed from Jul 2012 to Jun 2013). In addition, NAC saw its NPI grow 9.8% YoY due to a 10.0% rent increase for Toshin master lease. This led to a 6.9% YoY growth in Singapore portfolio’s NPI. Australia portfolio NPI also jumped 32.7% YoY as a result of incremental income from its recently acquired Plaza Arcade, despite a weaker AUD (down ~5%). This has more than offset the soft performance at the other overseas portfolios. For 2Q, we note that SGREIT’s Singapore portfolio contributed 63.7% of total revenue, largely unchanged from 66.3% in 1Q. Overall occupancy also stayed stable at 99.6%, compared to 99.7% seen in previous quarter.

Full potential not unleashed yet
Looking ahead, management believes the new renewal rate (+6.7%) for Toshin lease, 7.2% rental uplift from the Malaysia master leases, and continued repositioning of WA will help to bolster SGREIT’s income in 2H13. On its capital management front, SGREIT also expects its debt duration to improve from 1.2 years to 3.5 years and the percentage of debts fixed/hedged will increase from 81% to over 90%, having secured loan facilities to refinance all its debts due in 2013. We maintain BUY with unchanged fair value of S$0.95 on SGREIT.



Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 24/07/13

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