SINGAPORE (Apr 26): Maybank Kim Eng continues to rate Starhill Global REIT (SG REIT) at “sell” as it finds the units overvalued given a weak Singapore core, despite the underlying sector recovery.
The research house has further cut its price target estimate on SG REIT by 14% to 60 cents from 70 cents previously to factor in a reduction of FY18-19 DPU estimates by 7% on slower occupancies and rental assumptions, after the REIT’s 3Q18 DPU came in 8-10% below estimates.
See: Starhill Global REIT posts 7.6% drop in 3Q DPU to 1.09 cents
In a Friday report, analyst Chua Su Tye notes that the unit price of SG REIT has retreated 8% since Maybank initiated coverage on Jan 2 this year, underperforming the market and its peers in the retail space.
Notwithstanding its weak performance in Singapore, largely due to lower office occupancies and retail contribution at Wisma Atria, the REIT also saw a slowdown in the performance of SG REIT’s Australia properties, and tailwinds in Malaysia due to the appreciation of Malaysian ringgit against the Singapore dollar.
“We continue to see [SG REIT] as overvalued, with a lack of catalysts and a relatively weak balance sheet. We see SPH REIT as better leveraged to Orchard Road rental recovery,” says Chua.
As at 4:38pm, units in SG REIT are trading 1.4% lower at 71 cents or 0.8 times FY19 book.
