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Starhill Global Real Estate Investment Trust’s Latest Earnings: What Investors Should Know

Starhill Global Real Estate Investment Trust (SGX: P40U) released its sixth-quarter earnings report for its fiscal year ended 30 June 2015 (FY2015) yesterday evening. The reporting period was from 1 April 2015 to 30 June 2015.

As a brief note, Starhill Global REIT is in the process of changing its financial year end from 31 December to 30 June – hence, this reporting quarter was considered the sixth quarter.

The REIT owns stakes in prime retail properties in Singapore, Malaysia, Australia, China, and Japan. Closer to home, the REIT has a stake in Wisma Atria and the iconic Ngee Ann City along Singapore’s popular shopping belt, Orchard Road.

You can read more about the REIT in here and catch its previous quarter’s earnings here.

Financial highlights

Here’s a rundown on the latest financial figures from Starhill Global REIT:

  1. Gross revenue rose to $51.8 million in the sixth-quarter, up a good 6.9% compared to a similar period a year ago.
  2. For the reporting quarter, net property income (NPI) was also up by 5.5% year-on-year. NPI for the sixth-quarter came in at $41.3 million, compared to $39.2 million for the same period a year ago.
  3. Distribution per unit (DPU) for the reporting quarter was 1.29 cents, a 3.2% bump up from the 1.25 cents seen in the corresponding period last year.
  4. Starhill Global REIT’s portfolio value stood at $3.1 billion as of 30 June 2015. It had an adjusted net asset value per unit of $0.90, a slight 2.2% decline from a year ago.

Beyond these, Foolish investors might want to keep an eye on the REIT’s debt profile. The debt profile may provide clues on how the REIT is funded and its sensitivity to the interest rate environment. These are summarised for Starhill Global REIT below:

Starhill Global REIT balance sheet (30 July 2015)

Source: Starhill Global REIT’s earnings report

Total borrowings for Starhill Global has increased significantly over the past three months to $1.1 billion. Along with it, the REIT’s gearing ratio has also stepped up from 28.7% to 35.5%. The rise in leverage was mainly for the REIT to finance its acquisition of Myer Centre Adelaide which was completed in 18 May 2015.

Operational highlights

Majority of Starhill Global REIT’s revenue growth came from the acquisition of Myer Centre Adelaide and positive rental reversions from the Singapore properties. Both had offset weaker revenue from the REIT’s Malaysia, China, and Japan properties.

The REIT’s properties in China in particular had suffered a hefty 27.6% year-on-year plunge in revenue. Starhill Global REIT cited a softening China retail market, brought on by government austerity measures and increased competition, as a culprit.

It is also worth pointing out that shopper traffic and tenant sales for Wisma Atria in the reporting quarter had dipped by 6.6% and 6.7%, respectively, compared to the same period a year ago. The REIT pointed to a decline in tourist arrivals and tenant renovations (mainly Isetan) as the main reasons for the phenomenon. Investors may want to watch this trend carefully as the health of a retail mall – like Wisma Atria – is ultimately tied to the health of its tenants’ businesses.

Starhill Global REIT ended the reporting quarter with an overall committed occupancy rate of 99.3%. The REIT also had a weighted average lease term to expiry of 6.8 years and 5.0 years by net leasable area and gross rent, respectively.

Ho Sing, the CEO of Starhill Global REIT’s Manager, summarized the reporting-quarter and the REIT’s future outlook in the comments below:

“We are pleased to have successfully completed the acquisition of Myer Centre Adelaide located in the city’s premier shopping street. The maiden contribution from the asset this quarter boosted the Australia NPI by 53.2% to S$6.0 million. Singapore, our core market, continued its strong performance with NPI growth of 4.3% on the back of healthy rental reversions and high occupancies.

Our overall financial position remains strong with a gearing of 35.5% and no significant refinancing is required until 2018. Standard & Poor’s has also recently affirmed SGREIT’s corporate rating of “BBB+”.

Looking ahead, we will focus on asset enhancement works in Australia and will continue to sharpen and improve the quality of our portfolio.”

Foolish summary

Starhill Global REIT last traded at $0.85 yesterday. This translates to a historical price-to-book ratio of 0.94. With a DPU of 5.11 Singapore cents on a trailing-12-months basis, this would yield 6% on Wednesday’s closing share price.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.