SINGAPORE (May 26): OCBC Investment Research is keeping its “buy” call on Starhill Global Real Estate Investment Trust (SGREIT) despite continued operational challenges expected in the near term.
“We believe its softer growth prospects has been priced in by the market,” says OCBC lead analyst Andy Wong Teck Ching in a Friday report.
However, OCBC has marginally lowered the fair value estimate for SGREIT by 1 cent to 81 cents, as FY17 and FY18 distribution per unit (DPU) forecasts were cut by 2.4% and 1.5%, respectively.
SGREIT saw DPU fall 6.3% year-on-year to 1.18 cents for the third quarter ended March.
Gross revenue for the quarter dipped by 0.6% to $53.3 million, while net property income came in 0.9% lower at $41.2 million.
(See: Starhill Global REIT 3Q DPU down 6.3% to 1.18 cents)
“Looking ahead, we expect operational challenges to persist in the near-term, although we believe this would be mitigated by a higher rental uplift of 6.12% from Aug 2017 as a result of the next lease review with David Jones,” Wong says.
Amid the challenges, SGREIT’s management has been “seeking opportunities to streamline its portfolio and pare down its non-core assets,” according to Wong.
The REIT recently divested its entire beneficial interests in the 3-storey Harajuku Secondo Property retail building for 410.2 million yen ($5.1 million).
“SGREIT’s decision to divest does not come as a surprise to us,” Wong says. The Harajuku property had accounted for a mere 0.1% of SGREIT’s portfolio by asset value, he adds.
In January last year, SGREIT had divested its Roppongi Terzo property, also located in Tokyo, Japan, for 2.5 billion yen.
As at 12.01pm, units of SGREIT are trading flat at 76 cents.
