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Highlights From Starhill Global REIT’s FY2017/18 Q3 Earnings

Recently, I wrote an article detailing the three cheapest REITs in Singapore. In that article, I noted that Starhill Global Real Estate Investment Trust (SGX:P40U) is the third cheapest REIT in terms of its price-to-book ratio. The REIT, which owns and manages 10 properties including Singapore landmarks, Wisma Atria and Ngee Ann City along Orchard Road, was trading at almost a 25% discount to its book value.

As such, I thought it would be a useful follow-up to that article to discuss some of the important financial numbers and developments in Starhill Global REIT’s latest quarterly result. With that, here are 10 takeaways from its earning update:

1. In the third quarter of FY17/18, which ended on 31 March, gross revenue decreased 3% year-on-year to S$51.7 million from S$53.3 million. Consequently, net property income fell 2.3% to S$40.3 million from S$41.2 million a year ago. Distributable income was down 6.3% year-on-year to S$25.4 million from S$27.1 million.

2. As a result, distribution per unit declined 7.6% to 1.06 Singapore cents from 1.18 Singapore cents in the same period last year.

3. The decrease in revenue and income was largely due to weaker contributions from its office portfolio, disruption of income from asset redevelopment at Plaza Arcade in Perth and lower revenue at Myer Centre Adelaide.

4. As of 31 March 2018, Starhill Global REIT had S$1.1 billion in debt and assets worth a total of S$3.2 billion. This works out to a gearing ratio of 35.3%, which is within the 45% regulatory limit.

5. It had an interest cover of 4.1 times and weighted average debt maturity of 3.8 years. Around S$63 million and S$112 million in debt is due in 2018 and 2019 respectively. The REIT’s borrowings are 87% on fixed rate and 12% have interest rate caps.

6. At the end of the quarter, the REIT had a net asset value of S$0.92 per unit. This is unchanged from a year ago.

7. The REIT had a Singapore retail occupancy rate of 99.1% and an office occupancy rate of 90.7%. Notably, the Singapore office occupancy rate was at a 10-year low and was 2.2 percentage points higher than the previous year. Overall, the REIT had a portfolio occupancy rate of 94.3%.

8. The weighted average lease term stood at 6.2 years and 4.7 years by net lettable area and gross rent area respectively. Only 2.2% of leases by gross rent are due by 30 June 2018. However, a further 29% of leases are due in FY18/19.

9. On the prospects for the rest of the year, Tan Sri Dato’ (Dr) Francis Yeoh, Chairman of YTL Starhill Global said:

“The global economy is expected to maintain positive near-term momentum, but some risks and challenges remain,such as ongoing geopolitical tensions and uncertainties. The retail sector continues to evolve as it undergoes structural changes posed by e-commerce, coupled with an oversupply of retail space. However, our focus on niche prime locations, long-term and master leases as well as our timely rejuvenation efforts will stand us in good stead to weather the transformation of the retail landscape.”

10. At the time of writing, units of Starhill Global REIT exchanged hands at S$0.69. This translates to a price-to-book ratio of 0.75 and a trailing distribution yield of 6.8%.

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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 Jeremy Chia doesn’t own shares in any companies mentioned.