• Strong results from Singapore and Australia
• Loan rates substantially hedged or fixed
• Poised for further growth

Clear growth drivers

We continue to be positive on Starhill Global REIT’s (SGREIT) performance in 2014. SGREIT has recently delivered a strong set of 3Q13 results on the back of strength from its Singapore portfolio and new income stream from Plaza Arcade in Australia. We believe the full potential has yet been unleashed, as SGREIT has continued to make significant progress on its portfolio occupancy and rents over the year. For one, the office segment in Singapore has continued to see positive rental reversions and improved occupancy. Post redevelopment and asset repositioning of Wisma Atria, the property has also seen its rental rates and sale efficiency rise steadily. In Jun, SGREIT secured another 6.7% increase in base rent for the Toshin master lease at Ngee Ann City and a 7.2% rental uplift for its Malaysia assets. This positive momentum is likely to flow through positively into 2014, given that the retail rental market in Singapore is expected to stay positive in the next 6-12 months.

Significant improvement in debt profile

On the capital management front, SGREIT has been consistently maintaining a robust gearing level of ~30.0%. However, noteworthy was SGREIT’s recent drawdown of new unsecured loan facilities to refinance its debts due in 2013. As a result, SGREIT does not have any refinancing needs until Jun 2015, while its unencumbered asset ratio improves to 79.0% from 42.0% previously. As the new loans were also substantially hedged, its fixed/hedged debt ratio also increased to a significant 94.0% from 81.0% in 2Q13. This will limit its exposure to rising interest rates and provide unitholders greater certainty on its cash flows.

Maintain BUY

We continue to like SGREIT for its clear growth drivers, robust financial standing and compelling valuation. We are keeping our forecasts and fair value of S$0.95 intact as the recent developments have panned out according to our expectations. However, we do not rule out new investments/asset enhancements and capital recycling by SGREIT in 2014, which may provide further catalysts for growth. We maintain BUY on SGREIT.

Source: OCBC Research - 13 Feb 2014