Starhill Global Real Estate Investment Trust’s Latest Earnings: Distributions Hold Steady But …

Last Friday, Starhill Global Real Estate Investment Trust (SGX: P40U) released the results for its fiscal fourth-quarter and year ending 30 June 2016 (FY15/16).

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.

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

Financial Highlights

The following’s a rundown on some of the latest financial figures for Starhill Global REIT:

  1. Gross revenue was $53.6 million in the fourth quarter of FY15/16, up 3.6% compared to the similar period a year ago.
  2. For the reporting quarter, net property income (NPI) inched up 0.2% year-on-year to $41.4 million.
  3. Distribution per unit (DPU), though, was flat at 1.29 cents in the reporting quarter.
  4. As of 30 June 2016, the REIT’s portfolio is valued at $3.14 billion. Starhill Global REIT ended the reporting quarter with a net asset value per unit of $0.92, up slightly from the $0.91 seen a year ago.

Beyond the above, investors might also 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 Globa REIT debt profile
Source: Starhill Global’s earnings report

As you can see from the table above, Starhill Global REIT’s debt profile didn’t change a lot from June 2015 to June 2016. The only noticeable difference is that the interest cover had decreased to 4.3 times.

There is very little debt coming due for Starhill Global REIT in FY16/17. But, 35% of its borrowings will have to be repaid in FY17/18.

Operational highlights

Starhill Global REIT’s DPU was unchanged in the fourth quarter, but the underlying business was a different story. Revenue from all countries fell, except for Australia.

Revenue from China and Japan suffered falls of 42% and 25% year-on-year respectively. China recorded lower revenue due to a soft retail market. There was also a loss in contribution from a divested property in Japan. Australia benefited from a full quarter’s contribution from the Myer Centre Adelaide acquisition. Revenue in Australia was up over 46% year on year.

During the quarter, Wisma Atria’s shopper traffic increased by 2.3%, but tenant sales fell 2.5%. The REIT pointed towards tenant renovations as one of the main reasons. Investors may want to watch this trend carefully.

Overall, Starhill Global REIT ended the quarter with an overall committed occupancy rate of 95.1%. This is a decline from the 98.2% recorded a year ago. The REIT also had a weighted average lease term to expiry (by gross rent) of 5.1 years.

Ho Sing, the CEO of the REIT’s manager, summarized the quarter and outlook in a few words:

“The master lease with Toshin, together with the extension of the master tenancy agreements for the Malaysia Properties, provide the REIT with income stability and growth. These master leases combined represent approximately 34% of SGREIT’s gross rent and full period contributions from the revised rents will benefit FY 2016/17.

The net increase in portfolio valuation solidifies the resilience of our quality core assets in key Asia-Pacific cities. Our overall financial position remains strong with a stable gearing of 35.0% as at 30 June 2016 and no significant debt refinancing requirements until 2018. Going into the new financial year, we will focus on enhancing our Australian assets.”

Starhill Global REIT’s units last traded at $0.80 last Friday. This translates to a trailing price-to-book ratio of 0.88 and a trailing distribution yield 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 Chin Hui Leong doesn’t own shares in any companies mentioned.