Starhill Global REIT Review @ 2 April 2021

Basic Profile & Key Statistics

Starhill Global REIT (SGREIT) invests in retail and office properties which currently owns 10 properties across Singapore, Australia, Malaysia, Japan and China.

Performance Review

Gross revenue and NPI decreased YoY by 8.6% & 12.3% respectively mainly due to rental assistance as well as allowance for rental arrears and rebates. Distribution to unitholders and DPU decreased YoY by 16.1% and 16.8% respectively. This distribution included a partial release of S$ 3.1 million retentions.

Tenants' Sales reduced by 31.4% YoY despite all higher reductions of 49.6% in shopper traffic for Wisma Atria. Sales in Perth properties have recovered to pre-COVID-19 levels. No information is provided for other properties.

AEI for The Starhill is expected to complete by December 2021. Hopefully, the MCO disruption would not delay the AEI further.

Related Parties Shareholding

• REIT sponsor's shareholding is high at 37.62%
• REIT manager's shareholding is high at 1.43%
• Directors of REIT manager's shareholding is low at 0.01%

Lease Profile

• Occupancy is slightly high at 96%
• WALE is long at 5.4 years
• Highest lease expiry within 5 years is high at 55.3% which falls in FY23/24 and beyond, without breakdown
• Weighted average land lease expiry is moderate at 61.94 years

Debt Profile

• Gearing ratio is moderate at 35.8%
• Cost of debt is high at 3.28%
• Fixed rate debt % is high at 92%
• Unsecured debt % is moderate at 77.1%
• WADM is short at 2.3 years 
• Highest debt maturity within 5 years is high at 35% which falls in FY22/23
• Interest coverage ratio is low at 2.6 times
• Preferred/perpetual securities over debt is moderate at 8.2%

Diversification Profile

• Top geographical contribution is slightly high at 61.8%
• Top property contribution is high at 33.6%
• Top 5 properties contribution is high at 91.2%
• Top tenant contribution is high at 22.2% 
• Top 10 tenants contribution is high at 58.2%
• Top 3 countries contribution is from Singapore, Australia and Malaysia which contribute more than 95% of GRI

Key Financial Metrics

• Property yield is low at 4.1%
• Management fees over distribution is high at 26.9% in which unitholders receive S$ 3.72 for every dollar paid 
• Distribution on capital is low at 1.9%
• Distribution margin is low at 32.9%
• Including retention, management fees over distribution, distribution on capital and distribution margin would be 24.9% (high), 2% (low) and 35.6% (low).

Trends

• Slight Downtrend - NAV per Unit
• Downtrend - DPU, Interest Coverage Ratio, Property Yield, Distribution on Capital, Distribution Margin

Relative Valuation

• Dividend Yield - Past 4 quarters DPU @ 2.58 cents / average yield @ 6.31% = S$ 0.41, include retention, DPU would be 2.78 cents which translate into S$ 0.44
• Price/NAV - NAV @ S$ 0.82 x average P/NAV @ 0.78 = S$ 0.64

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low Directors of REIT Manager's Shareholding
High Sponsor's Shareholding	High Cost of Debt
High Manager's Shareholding	Short WADM
Long WALE	Low Interest Coverage Ratio
High Fixed Rate Debt %	High Top Property & Top 5 Properties Contributions
	High Top Tenant & Top 10 Tenants Contributions
	Low Property Yield
	Non Competitive Management Fees
	Low Distribution on Capital
	Low Distribution Margin
	DPU Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

The lack of tourism activities in Singapore continues to affect SGREIT performance as both Ngee Ann City and Wisma Atria contribute more than 60% of gross revenue. Hopefully, the further easing of Covid-19 measures in Singapore starting 5 April which allows more workforce back to the workplace as well as potential travel bubble arrangement between Singapore and other countries could improve its performance in the coming quarters.

 

For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support as a Patron and get SREITs Dashboard PDF or Data Excel

REIT-TIREMENT Facebook Page - Support by liking my Facebook Page

REIT Investing Community - Facebook Group where members share and discuss REIT topic

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.