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Starhill Global Real Estate Investment Trust’s Latest Earnings: Distributions Fall 4.5%

Credit: Calvin Teo

Yesterday, Starhill Global Real Estate Investment Trust (SGX: P40U) released its second quarter earnings report for its financial year ending 30 June 2017 (FY16/17). The reporting period was from 1 October 2016 to 31 December 2016.

As a quick background, 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 that’s located in Singapore’s prime Orchard Road shopping belt.

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

Financial highlights

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

  1. Gross revenue was $54.1 million in the second quarter of FY16/17, a decrease of 2.8% compared to FY15/16’s second quarter.
  2. For the reporting quarter, net property income (NPI) fell by 5.4% year-on-year to $41.4 million.
  3. Distribution per unit (DPU) was down 4.5% to 1.26 cents in the reporting quarter. In the same period in FY15/16, DPU was 1.32 cents per unit.
  4. The REIT’s property value is currently $3.1 billion. It ended its reporting quarter with an adjusted net asset value per unit of $0.91, down from the $0.89 seen a year ago.

Beyond these, Foolish investors may 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. The table below shows Starhill Global REIT’s current and year-ago debt profile:

2017-01-27 Starhill Global REIT
Source: Starhill Global’s earnings presentations

Starhill Global REIT’s debt profile has not changed much compared to the same period in 2015, besides the decline in its interest cover to 4.0 times.

The REIT does not have any debt coming due in FY16/17, although $401 million of borrowings will mature in FY17/18.

Operational highlights

Revenue from Wisma Atria for the retail and office segment declined by 5.6% and 7.0% respectively due to a change in the tenant trade mix and lower occupancies. The office segment in Ngee Ann City also experienced a fall of 4.0% in revenue due to lower occupancies. But, the retail segment saw a 4.6% uptick in revenue.

Starhill Global REIT’s Malaysia portfolio also benefited from a higher base rental from master tenant Toshin.

Meanwhile, shopper traffic at Wisma Atria rose 2.1% but tenant sales declined by 2%. Investors may want to watch trends in the two metrics carefully.

Starhill Global REIT ended the reporting quarter with an overall committed occupancy rate of 95.4%, down from 98% in the same period in 2015. The REIT also reported a weighted average lease term to expiry (by gross rent) of 4.8 years.

Ho Sing, the CEO of Starhill Global REIT’s manager, summarized the reporting quarter and the REIT’s outlook with the following comments:

“Amidst market challenges, the REIT has pulled in a relatively resilient performance with healthy portfolio occupancy of 95.4% as at 31 December 2016.

The asset redevelopment for Plaza Arcade in Perth, Australia and the mall repositioning in China are progressing according to schedule. Notices for the recovery of affected units by the asset redevelopment in Plaza Arcade have been served while construction work is expected to commence in mid-2017. The mall’s retail floor space will be expanded by 33% to accommodate a new international tenant.

We have ceased operations in our China mall in preparation for the handover to our new tenant, Markor International Home Furnishings Co., Ltd in the next quarter. This new long term fixed lease tenancy is expected to stabilise China’s income stream.”

Starhill Global REIT’s units last traded at a price of $0.765 each on Thursday. This translates to a trailing price-to-book ratio of 0.84 and a trailing distribution yield 6.7%.

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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.