• 4Q13 DPU up 8.8% YoY
• Strong results from Singapore and Australia
• Improvement in gearing and book value

Closing FY13 on strong note

Starhill Global REIT (SGREIT) turned in a firm set of 4Q13 results last Friday. NPI rose by 3.4% YoY to S$38.8m due to higher contribution from Singapore properties and Plaza Arcade acquired in 1Q13, while distributable income climbed 9.5% to S$27.2m. DPU was up 8.8% YoY to 1.23 S cents, after retaining S$0.5m (c. 0.02 S cents) for working capital. This brings the FY13 DPU to 5.00 S cents (+13.9%), in line with our annual DPU forecast of 4.95 S cents (consensus: 4.9 S cents). Based on last traded price, DPU yield was at 6.6%, higher than the average yield of 5.7% seen among its domestic retail peers.

Sustained growth in Singapore portfolio

Singapore portfolio continued to deliver good performance, thereby increasing its percentage revenue contribution to 65.5% from 63.0% in 4Q12. Notably, Ngee Ann City retail NPI gained 16.6% YoY amid 6.7% rental uplift from Toshin master lease renewal in 2Q. In addition, Wisma Atria retail NPI saw a 5.0% increase, driven by positive rental reversion of 8.1% in 2013 and ongoing asset repositioning post refurbishment works. We understand that tourism growth and positive consumer sentiment had improved tenant sales by 20.0% in 2013, translating to an improved sales efficiency of S$138 psf at the mall. Within Singapore office space, SGREIT benefitted from healthy demand and limited office supply in Orchard Road, hence helping to push the office NPI up by 11.5% YoY (+12.3% reversion in 2013). Together with a 23.2% growth in NPI from SGREIT’s Australia properties, this had outweighed softness in its other overseas assets, which was dragged down by unfavourable forex movements, divestment and increased competition.

Maintain BUY

For the quarter, SGREIT also saw a S$137.5m revaluation gain in its portfolio. As a result, gearing ratio improved by 1.6ppt QoQ to 29.0%, while book value rose by 7.3% QoQ to S$0.92. This implies a 0.82x P/B, the lowest within the local retail space. We maintain BUY on SGREIT, but revise our fair value to S$0.90 from S$0.95 to reflect higher risk-free rate and risk premium assumptions.

Source: OCBC Research - 27 Jan 2014