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Starhill Global Real Estate Investment Trust’s DPU Declines 4.5%: Here’s What Happened

Starhill Global Real Estate Investment Trust (SGX: P40U) reported a decline in distribution per unit (DPU) yesterday due to lower contributions from most of its underlying properties.

The report was for its first-quarter earnings for the fiscal year ending on 30 June 2019 (FY18/19). Starhill Global Real Estate Investment Trust (REIT) is a Singapore based REIT with properties in the retail and office segment. The REIT’s portfolio consists of 10 properties spread across Singapore, Australia, Malaysia, China and Japan which are valued at S$3.1 billion.

Let’s take a quick look at the latest quarter’s results.

  1. Gross revenue declined by 1.8% year-on-year to S$52.0 million while net property income reduced by 2.3% to S$40.4 million. The decrease in revenue and net property income was on the back of lower contributions from the REIT’s Singapore retail portfolio coupled with a depreciation of in the Australian dollar. The decline was partially offset by higher contributions from gains from its Singapore office and Plaza Arcade (following the completion of its asset redevelopment) as well as the appreciation of the Malaysian ringgit.
  2. Distributable income also dropped by 1.9% to S$26.2 million compared to the same period in the previous year. This result was a 4.2% pullback in distribution per unit (DPU) which came in at 1.15 cents.
  3. Next, we take a look at the REIT’s debt profile. As of 30 September 2018, Starhill Global REIT’s gearing stood at 35.4%. The weighted average annualized interest rate came in 3.28% with about 92% of the debt on fixed-rate or hedged loans. Average debt duration for Starhill stood at 3.5 years with no debt refinancing liabilities remaining for FY18/19.
  4. Starhill Global REIT’s portfolio had an occupancy rate of 94.1%, which was relatively unchanged compared to the previous quarter. The weighted average lease expiry (by gross rental income) for the portfolio stood at 4.3 years at the end of the reporting quarter. Around 29% of the REIT’s leases are expiring in FY18/19.
  5. Lastly, the REIT’s net asset value (NAV) stood at S$0.91 which was unchanged from three months ago.

The Road Ahead

Tan Sri Dato’ (Dr) Francis Yeoh, Chairman of YTL Starhill Global, commented on the outlook:

“Global economic growth may be suppressed by the escalating trade dispute between the two largest economies in the world as well as rising interest rates. While the global retail industry is experiencing structural changes as a result of changing consumer preferences which present new challenges, we believe there are new opportunities for progressive retailers as well as innovative and forward-thinking landlords. We will continue to assess potential asset enhancement and acquisition opportunities for our portfolio, by leveraging on our sound financial standing.”

Units of Starhill closed at S$0.66 yesterday, sporting a price-to-book ratio of 0.72 and a yield of 6.84%.

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own any of the shares mentioned.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned.