Latest Earnings From Starhill Global Real Estate Investment Trust: What Investors Need To Know

Credit: Calvin Teo

Last Friday, Starhill Global Real Estate Investment Trust (SGX: P40U) released its third-quarter earnings report for its fiscal year ending 30 June 2016. The reporting period was from 1 January 2016 to 31 March 2016.

The real estate investment trust (REIT) owns stakes in 12 prime retail properties in Singapore, Malaysia, Australia, China, and Japan. In Singapore, the REIT has interests in Wisma Atria and the iconic Ngee Ann City along Singapore’s prime Orchard Road shopping belt. Starhill Global’s portfolio has a collective value of around S$3 billion.

You can catch the results from the REIT’s previous quarter in here.

Financial highlights

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

  1. Gross revenue was $53.6 million in the reporting quarter, up 12.0% compared to the same period a year ago. Growth here was driven primarily from contributions from Myer Centre Adelaide which was acquired in May 2015.
  2. Net property income (NPI) also moved up by 7.0% year-on-year to $41.6 million.
  3. But, the REIT’s income available for distribution actually slipped by 1.5% to $28 million compared to the corresponding quarter in the previous year.
  4. That said, the REIT’s distribution per unit (DPU) had remained unchanged at 1.26 cents.
  5. The REIT ended the reporting quarter with a net asset value of S$0.90, a decline of 4% compared to 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:

StarHill Global REIT balance sheet (25 April 2016)
Source: Starhill Global’s earnings report

As you can see from the table, the REIT’s total borrowings have increased to S$1.12 billion compared to a year ago and pushed up the gearing ratio to 35.4% as a result. (The increase in borrowings was to finance the acquisition of Myer Centre Adelaide.) Meanwhile, Starhill Global’s interest cover ratio had also dropped.

Operational highlights

The majority of Starhill Global’s revenue growth came largely from its acquisition of Myer Centre Adelaide as previously mentioned. But there were other bright spots too. The REIT’s Singapore office portfolio had enjoyed 2.3% and 3.3% year-on-year growth in revenue and net property income, respectively, for the quarter. Starhill Global had credited a limited new supply of office space in Orchard Road as the support for leasing demand.

Starhill Global ended the reporting quarter with an overall committed occupancy rate of 95.6%, which is a notable drop from the figure of 99.1% a year ago. The decrease in the occupancy rate is mainly due to the Australia segment where there is a lease expiry of one office tenant at Myer Centre Adelaide and a termination of leases in relation to planned enhancement works for Plaza Arcade.

Ho Sing, the chief executive of Starhill Global’s manager, had summarized the REIT’s reporting quarter and ongoing plans to drive growth:

“The extension of the master tenancy agreement, which provides income stability, has been concluded recently for the Malaysia Properties with the higher rent to commence from 28 June 2016. Rent review discussions with Toshin for the master lease at Ngee Ann City Property has also started.

In Singapore, Wisma Atria Property has seen improving tenant sales and foot traffic as Isetan’s strata-owned space progressively reopens after its closure for renovation since the beginning of 2015.

In Australia, we have partially activated the unutilised upper levels of Myer Centre Adelaide for short-term leases. Discussion with prospective tenants to take-up on a more permanent basis is on-going.”

Starhill Global traded at $0.79 last Friday. This translates to a trailing price-to-book ratio of 0.87 and a trailing distribution yield of 6.5%.

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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 James Yeo doesn’t own shares in any companies mentioned.