3 Key Takeaways from Starhill Global Real Estate Investment Trust’s Second Quarter Results

Starhill Global REIT

Starhill Global Real Estate Investment Trust (SGX: P40U), which owns retail and office assets in Singapore, Malaysia, Australia, China and Japan, released its second quarter earnings on Tuesday. Locally, it has interests in Wisma Atria and Ngee Ann City along Orchard Road.

Let’s take a look at three key takeaways from the trust’s latest financial report card.

1. Financial performance

Revenue for the quarter came up to S$48.4 million, 1.4% lower than a year ago mainly due to lesser contributions from the REIT’s overseas properties. Net property income was higher at S$39.2 million, representing a slight increase of 0.2% over the previous year because operating expenses for properties in Singapore, Japan, and China had declined. Distribution per Unit (DPU) for the period was at 1.25 Singapore cents, which represents a 5% increase over the previous year’s pay-out of 1.19 Singapore cents.

As of 30 June 2014, the trust’s gearing ratio was at 29.4%, a slight improvement from the ratio of 29.6% seen three months ago. All of Starhill Global REIT’s borrowings are currently fully fixed and/or hedged via interest rate swaps and caps. This mitigates any impact an increase in interest rates might have on the REIT’s future performance until it needs to refinance its borrowings; the first tranche of debt worth S$252 million comes due in 2015.

Starhill Global REIT ended the quarter with a book value per unit of S$0.93, a drop of S$0.01 per unit from the previous sequential quarter.

2. Performance of Singapore portfolio

The trust’s Singapore portfolio contributed 67% of total revenue for the quarter. Wisma Atria’s retail leases achieved positive rental reversions (where rental rates are adjusted to prevailing market conditions) of 12.3% for leases committed in the quarter. Shopper traffic at the mall increased by 6.8% year-on-year to 6.5 million but tenants’ sales came in flat compared to a year ago.

The REIT’s total office portfolio in Singapore (consisting of office spaces in Wisma Atria and Ngee Ann City) had a full occupation rate and achieved a 17.9% increase in rent for leases committed in the quarter.

3. Future outlook

Tan Sri Dato’ (Dr) Francis Yeoh, who’s the Executive Chairman of the Manager of Starhill Global REIT, commented on the trust’s outlook:

“Tourist arrivals in Singapore have been affected by recent regional events. Despite this, our portfolio in Singapore continued to perform well, reflecting the quality of the assets as well as the continuous drive in repositioning our malls. We remain positive on the outlook of Asia’s economies and will continue to sharpen our portfolio while seeking out opportunities either through enhancement of our existing portfolio or acquisitions when opportunities arise in our core markets.”

Starhill Global REIT last closed at S$0.84 on Tuesday, representing a price to book value of 0.9. The REIT also carries a distribution yield of 5.9%, taking into account the latest DPU and the DPU of the last three quarters.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.