Starhill Global REIT Review @ 4 February 2022

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 Highlight

Gross revenue and NPI increased YoY due to lower rental assistance as well as cessation of rental rebates due to AEI work in The Starhill, Malaysia. However, distributable income is lower due to the one-off adjustment to reflect the timing difference of Singapore property tax refunds. The DPU (excluding the effect of deferred amount) is higher due to lower amount retained for working capital use.

Tenant Sales and Shopper Traffic

For Wisma Atria, shopper traffic and tenant sales are affected during the stabilization period. After stabilization period, shopper traffic and tenant sales increased 14.6% YoY and 1.3% YoY respectively.

Asset Enhancement Initiatives

The AEI work for The Starhill has been completed in December 2021. As for Wisma Atria, the AEI for washroom upgrading is expected to be completed by March 2022. Atrium work expected to start in March 2022.

Related Parties Shareholding

• REIT sponsor's shareholding is high at 37.602%
• REIT manager's shareholding is high at 2.035%
• Directors of REIT manager's shareholding is low at 0.007%

Lease Profile

• Occupancy is slightly high at 96.9%
• WALE is long at 5 years
• Highest lease expiry within 5 years is high at 34.6% which falls in FY24/25 and beyond, without breakdown
• Weighted average land lease expiry is moderate at 61.76 years

Debt Profile

• Gearing ratio is moderate at 36.1%. Include perpetual securities, gearing is at 39.4%.
• Cost of debt is high at 3.02%
• Fixed rate debt % is high at 90%
• Unsecured debt % is slightly high at 84.7%
• WADM is long at 3.5 years
• Highest debt maturity within 5 years is low at 23% which falls in FY25/26
• Interest coverage ratio is low at 2.8 times
• Preferred/Perpetual Securities over Debts is moderate at 8.3%

Diversification Profile

• Top geographical contribution is high at 62.6% 
• Top property contribution is high at 35.5% 
• Top 5 properties contribution is high at 91.2% 
• Top tenant contribution is high at 22.6% 
• Top 10 tenants contribution is high at 59.4%
• Top 3 countries contribution is from Singapore, Australia and Malaysia which contribute more than 95% of GRI

Key Financial Metrics

• Property yield is slightly low at 4.7% 
• Management fees over distribution is high at 18% in which unitholders receive S$ 5.56 for every dollar paid 
• Distribution on capital is low at 2.9%
• Distribution margin is moderate at 46.6%

Trends

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

* Interest coverage ratio between 1Q 2021 to 3Q 2021 are estimated to include perpetual securities.

Relative Valuation

• P/NAV - Average for 1y, 3y and 5y
• Dividend Yield - Average for 1y, 3y and 5y

Author's Opinion

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

Performance has been improved as compared to the previous quarter. With the relaxation of COVID restriction in Singapore after 22 Nov and completion of AEI at The Starhill, SGREIT performance is expected to be improved moving forward.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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Singapore REITs Post Telegram Channel - Join to receive posts for Singapore REITs

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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 and 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.