CGS-CIMB Research continues to rate Starhill Global REIT (SGREIT) "add" with an increased target price of 68.3 cents from 66 cents previously.
This came on the back of the REIT announcing its 3QFY2021 ended March business update, which saw revenue drop 0.6% y-o-y to $46.4 million, while net property income (NPI) was 0.6% higher y-o-y at $35.4 million.
The stable NPI was mainly due to lower rental assistance given to tenants affected by Covid-19, lower operating expenses and the appreciation of the AUD. The figure was partly offset by the weaker performance of the REIT’s portfolio in Singapore.
See: Starhill Global REIT posts 0.6% lower 3Q20/21 revenue of $46.4 mil
Occupancy for the third quarter period already remained relatively stable for the REIT, as it showed a slight q-o-q decline from 96% to 95.5%. The weaker occupancy was due to the decline of occupancy in its Singapore retail portfolio and Australia portfolio.
In an April 26 report, lead analyst Eing Kar Mei says, "However, committed occupancy for Singapore retail remained high at 98.3%. The REIT’s assets in Japan, China and Malaysia remained fully occupied, largely supported by a single tenant in China and master leases in Malaysia."
Meanwhile, tenant sales and shopper traffic have shown improvement, notably at Wisma Atria, which saw significant improvement as tenant sales recovered to 83.4% of 3QFY2020’s level, compared to 70% in 2QFY2021. Shopper traffic in 3QFY2021 improved to 74.2% of 3QFY20’s level, compared to 50-60% in 2QFY21.
Eing notes that SGREIT has commenced asset enhancement initiatives (AEI). She believes that this will help rejuvenate the REIT's portfolio for long-term growth.
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Already, AEI works at Wisma Atria have commenced and is expected to complete 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.
"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," says Eing.
As at 11.30am, units in SGREIT are trading at 58 cents.
