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

Credit: Calvin Teo

Starhill Global Real Estate Investment Trust (SGX: P40U) released its fiscal second-quarter earnings report yesterday. The reporting period was from 1 October 2015 to 31 December 2015.

As a reminder, Starhill Global recently changed its financial year end from 31 December to 30 June. The reporting quarter is considered to be the second quarter 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 prime Orchard Road shopping belt.

You can read more about the REIT in here and catch the results from its previous quarter in here.

Financial highlights

The following’s a quick rundown on the financial figures for Starhill Global:

  1. Gross revenue was $55.6 million in the second quarter of FY15/16, surging by 13.8% compared to the same period a year ago.
  2. For the reporting quarter, net property income (NPI) moved up by 10.4% year-on-year. NPI for the second quarter of FY15/16 came in at $43.7 million.
  3. Distribution per unit (DPU), though, was only up by 2.3% to 1.32 cents in the reporting quarter. In the corresponding period last year, the DPU was 1.29 cents.
  4. The REIT’s property value stands at $3 billion currently. It had an adjusted net asset value per unit of $0.89 as of 31 December 2015, down from $0.93 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 below:

2016-01-27 Starhill Debt Table
Source: Starhill Global’s earnings report

Total borrowings for Starhill Global has increased to $1.1 billion as of 31 December 2015. Meanwhile, its gearing ratio has also increased to 35.7%, up from 28.6% a year ago. The increase in borrowings was to finance the acquisition of Myer Centre Adelaide which was completed on May 2015.

Operational highlights

The majority of Starhill Global’s revenue growth came from its acquisition of Myer Centre Adelaide and a solid showing from its Wisma Atria property.

These were offset by weaker performance from the REIT’s Malaysia and China properties. Revenue from China, in particular, fell a hefty 34.4% year-on-year. Starhill Global cited a softening Chinese retail market 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 had declined by 2.5% year-on-year. Tenant sales also dipped by 1%. The REIT pointed towards tenant renovations (Isetan) as one of the main reasons. Investors may want to watch this trend carefully.

In other news, Starhill Global also divested its Roppongi Terzo property for JPY2.5 billion (approximately S$29.9 million) on 7 January 2016. The sale is at a slight premium compared to its latest valuation of JPY2.44 billion as at 31 December 2015.

Overall, Starhill Global ended the reporting quarter with an overall committed occupancy rate of 98%, a slight decline from the figure of 99.6% a year ago. The REIT also had a weighted average lease term to expiry (by gross rent) of 4.9 years at end-2015.

Ho Sing, the chief executive of Starhill Global’s manager, had summarized the REIT’s quarter and future outlook in the earnings release with a few words:

“Our robust performance of 10.4% y-o-y growth in NPI in 2Q FY15/16 was led by the strength of our Singapore portfolio amidst market challenges and contribution from Myer Centre Adelaide acquisition in May 2015. In January 2016, we divested one of our five properties in Tokyo. This sale marks the third property we have divested in Tokyo in the past three years while we have reinvested in two high-yielding Australian properties as we continue to sharpen and improve the quality of our portfolio.”

Foolish summary

Starhill Global last traded at $0.73 yesterday. This translates to a trailing price-to-book ratio of 0.82 and a trailing distribution yield of 7.1%.

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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.