StarHill Global Reit In Focus

Buy. SG Reit has a diversified portfolio of prime retail and office assets located in Asia Pacific Region. With around 44% of top line derived from master lease, the Reit offers Investors income stability as well as upside potential from positive rental reversions embedded in the master leases.

ALP REIT INVESTMENT CLUB

StarHill Global Reit (P40U)

(20 July 2016) close price: S$0.795

12M-Target price: S$0.854

Distribution Yield: 6.428%

1.) Type of Reit: Global StarHill Reit operates as Retail & Office REIT.

2.) Number of property in the portfolio: 13 properties in Singapore, Australia, Malaysia, China and Japan.

These comprise interests in Wisma Atria and Ngee Ann City on Orchard Road in Singapore; Myer Centre Adelaide, David Jones Building and Plaza Arcade in Australia; Starhill Gallery and Lot 10 Property in Kuala Lumpur, Malaysia; a retail property in Chengdu, China and five properties in the prime areas of Tokyo, Japan.

3.) Countries that the business operates in: The Portfolio’s gross revenue is diversified across Singapore 67.3%, Malaysia 14.8%, Australia 11.0%, China 4.7% and Japan 2.2% for FY 2014/15. T

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4.) Top 5 properties that generates the highest revenue (Decreasing order): Wisma Atria Property (35.2%), Ngee Ann City Property (32.2%), Starhill Gallery (9.3%), David Jones Building (6.8%), Lot 10 Property (5.6%)

5.) Weighted average lease expiry (WALE) profile: As at 30 June 2015, the weighted average lease term expiry (by NLA) of the Portfolio is 6.8 years.

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6.) Debt maturity profile: Average debt maturity remained stable at 3.5 years as at 30 June 2015, the maturity profile le is better staggered with maturity being extended up to year 2023. With the recent series of refinancing in July 2015, there will be no significant debt refinancing requirement until 2018 and average debt maturity has been extended to approximately 4.1 years.

7.) Challenges: Wisma Atria’s occupancy has dropped to 96.8% from 100% a year ago. This is largely due to tenant mix reconfiguration and the renovation at Isetan since 2015.

8.) Strengths: We are anticipating 2-year DPU CAGR of 3.7% from FY15-17, driven primarily by contribution from Myer Centre Adelaide, which was acquired for A$288m in May 2015. This acquisition will boost contribution from Australia to 24% from 11%, further diversifying its earning profile, which is still concentrated in Singapore.

 The upcoming rent review for Toshin lease at Ngee Ann City is a near-term catalyst which will have a significant positive impact on distributions as Toshin accounts for about 19% of top line in end-FY16. Toshin renewed the lease for another twelve years beginning June 2013.

9.) Significant events: YTL Group converted the remaining 20,334,750 CPU issued in June 2010 into 27,986,168 Units, raising its stake in Starhill Global REIT to 37.09%. Following this conversion, there are no more CPU.

10.) TABLE:

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11.) Recommendation: Buy. SG Reit has a diversified portfolio of prime retail and office assets located in Asia Pacific Region. With around 44% of top line derived from master lease, the Reit offers Investors income stability as well as upside potential from positive rental reversions embedded in the master leases.

 COMPILED BY: Jacqueline

DISCLAMER: Readers should not rely solely on information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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