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

Credit: Calvin Teo

Starhill Global Real Estate Invmt Trust (SGX: P40U) released its quarterly earnings report yesterday. The reporting period was from 1 July 2015 to 30 September 2015.

As a note, Starhill Global has completed the change of its financial year end from 31 December to 30 June in the last quarter. This reporting quarter is considered to be the first quarter of for the financial year ending 30 June 2016 (FY15/16).

The real estate investment trust (REIT) owns stakes in prime retail properties in Singapore, Malaysia, Australia, China, and Japan. In Singapore, the REIT has a stake in Wisma Atria and the iconic Ngee Ann City along Singapore’s Orchard Road.

You can read more about the REIT here and catch the previous quarter earnings here.

Financial Highlights

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

  1. Gross revenue was $56.8 million in the first quarter of FY15/16, surging 16.8% compared to the similar period a year ago.
  2. For the reporting quarter, net property income (NPI) moved up by 10.2% year on year. NPI for the first quarter of FY15/16 came in at $43.6 million.
  3. Distribution per unit (DPU), though, was only up by 3.1% to 1.31 cents per unit in the reporting quarter. In the corresponding period last year, the DPU was 1.27 cents per unit.
  4. As of 30 June 2015, REIT’s property value stood at $3.1 billion as of 30 June 2015. It had an adjusted net asset value per unit of $0.88.

Beyond that, Foolish investors might want to keep up an eye with 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. This is summarized below.

2015-10 Starhill Table Source: Starhill Global’s earnings report

Total borrowings for Starhill Global has increased to $1.1 billion as of 30 September 2015. Meanwhile, its gearing ratio has also increased to 35.7%, up from 29.1% a year ago. The increase in borrowings was to finance the acquisition of Myer Centre Adelaide, which was completed in 18 May 2015.

Operational Highlights

Majority of the revenue growth came from the REIT’s acquisition of Myer Centre Adelaide and a solid showing from its Wisma Atria property.

This was offset by weaker revenue from its Malaysia and China properties. Revenue in China and Malaysia both fell by double digit percentages year on year. Starhill Global cited a softening Chinese retail market and a weak Malaysian ringgit, respectively, as the cause of the fall in revenue.  

Despite the solid results at Wisma Atria , it is worth pointing out that shopper traffic for the mall declined by 9.7%. Meanwhile, tenant sales rose 1.1%. The REIT pointed towards tenant renovations (Isetan) as the reason. As Foolish investors, we may want to watch this trend carefully.

Overall, Starhill Global ended the quarter with a committed occupancy rate of 98.3%. The REIT also had a weighted average lease term to expiry (by gross rent) of 4.9 years.

Ho Sing, the CEO of YTL Starhill Global summarized the quarter and outlook in the two paragraphs below:

We started the new financial year with a robust performance in the first quarter. Led by the sustained strength of our Singapore portfolio and the full quarter contribution from our recent acquisition of Myer Centre Adelaide, NPI grew by 10.2% y-o-y in 1Q FY15/16. Our master/long-term leases, with the inclusion of Myer’s long-term lease, provide income stability for the Group.

We have no significant debt refinancing requirement until 2018 and all our borrowings remain fully hedged via a combination of fixed rate debt and interest rate caps and swaps.

Foolish summary

Starhill Global last traded at $0.80 yesterday. This translates to a trailing price-to-book ratio of 0.91 and a trailing yield 6.4% on yesterday’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.