STI : 3,205.24
Downgrade from BUY
Price Target : 12-Month S$ 0.87 (Prev S$ 0.84)
Positives priced in
• 3Q13 results in line
• Weaker overseas income mitigated by strong performances at Ngee Ann City and Wisma Atria
• Downgrade to HOLD, TP raised to S$0.87
Results in line. Starhill Global REIT (SGREIT) reported higher gross revenues and NPI of S$49m (+5% y-o-y) and S$38m (+4%), respectively in 3Q13. This was attributable to solid performances at its Singapore assets. At Ngee Ann City, the Trust is enjoying 10% higher base rents from Toshin after completion of the rent review in 1Q13. Wisma Atria continues to see strong growth in tenant sales (+12% y-o-y), underscoring the Trust’s successful execution of AEI works at the mall last year. This was somewhat tempered by a weak showing from its overseas assets. Distributable income rose to S$26m, translating to a DPU of 1.21Scts (+9% y-o-y),
Headwinds for overseas assets. The weakness in the AUD/SGD exchange rate eroded income from the recently acquired Plaza Arcade in Australia. Contributions from Chengdu mall declined as government austerity measures affected high-end retail sales, and looking ahead, increasing competition from new supply in the vicinity will likely present further operational challenges and earnings downside.
Downgrade to HOLD, TP S$0.87. Backed by a quality portfolio with good earnings visibility, we believe that positives have already been priced in at this level. We have therefore downgraded the stock to HOLD on valuation grounds, given limited upside to our rolled-forward TP of S$0.87. The stock is currently trading at 1.0x P/BV, and is offering FY13/14 yields of 6.1%/6.4%.
Publish date: 28/10/13