Analysts are generally positive on Starhill Global REIT (SG REIT) following its latest 1HFY2021 results announcement.
During the first half ended December, distribution per unit (DPU) stood at 1.88 cents, 16.8% lower than the previous year, largely due to rental assistance for its eligible tenants affected by the Covid-19 pandemic. Gross revenue was 8.6% lower y-o-y at $88.4 million, bringing net property income to $65.0 million, 12.3% lower than the previous year.
On the bright side, actual portfolio occupancy remains resilient at 96.0% in 1HFY2021, with stable retail portfolio occupancy of 96.9%.
Looking forward, the retail scene has seen some improvement. Ho Sing, CEO of YTL Starhill Global says, “We are encouraged by the improvement in tenants’ sales and shopper traffic at our malls while portfolio occupancy remains stable. We have been working with our tenants to help them ride through this difficult period, including the provision of targeted relief support which impacted the financial performance in 1HFY2021.”
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To that end, CGS-CIMB is reiterating its “add” call on SG REIT but with a lower target price of 66 cents from 70.6 cents previously.
In a Jan 29 report, lead analyst Eing Kar Mei likes the stock for its stable occupancy, as well as recovering tenant sales and football, despite the weaker 1HFY2021 results.
In Singapore, tenant sales and shopper traffic for Wisma Atria recovered gradually to about two-thirds to half of pre-Covid-19 levels y-o-y in 1HFY2021. Wisma Atria has also 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 December 2021. The REIT has secured a lease with Eslite Spectrum, Taiwan’s renowned lifestyle bookstore chain, as the anchor tenant of The Starhill; it also brought back existing tenants to the mall.
Meanwhile, gearing improved from 39.1% as at September 2020 to 35.8% as at December 2020.
SEE: Starhill Global REIT reports 16.8% lower 1H20/21 DPU of 1.88 cents due to lower revenue, NPI
SG REIT issued its maiden $100 million perpetual bonds at 3.8% to pay down debt and entered into a five-year unsecured $550 million facility, of which a $250 million term loan facility is expected to refinance a $100 million MTN upon maturity in February 2021 and a $150 million term loan in FY2022. “With this, SG REIT would have refinanced all of its debt in FY2021 and 65% of debt in FY2022, while 8.8% and 10.7% of its retail and office leases are up for renewal in FY2021,” notes Eing.
“With less rental rebates expected, we foresee a gradual recovery going forward. About 55% of its revenue in FY2020 was from long lease structures, which provided income stability,” she adds.
On the other hand, OCBC Research Group is keeping its “hold” recommendation on SG REIT with a target price of 53 cents.
In a Feb 1 report, the OCBC research team likes the stock for its two trophy assets – Wisma Atria and Ngee Ann City – in Orchard Road, as well as its overseas properties in Australia, China, Malaysia and Japan.
However, the team is still weary on the overall sector outlook. “While there are some signs of recovery from the Covid-19 pandemic, we believe there still exists uncertainties and a lack of earnings visibility ahead. Although some of SG REIT’s properties are under master leases, the severe and widespread impact of Covid-19 has resulted in management extending, or having the intention to extend some form of rental rebate to its master lessees to share the pain and build a stronger longer-term relationship,” it says.
As at 11.05am, units in SG REIT are trading at 54 cents or 0.6 times FY2021 book with a dividend yield of 7.5%, according to CGS-CIMB’s estimates.
