Starhill Global REIT (SGREIT) reported a soft set of 3QFY17 results but this was within our expectations. Gross revenue fell slightly by 0.6% YoY to S$53.3m, while NPI fell 0.9% to S$41.2m.

This was attributed largely to weaker contributions from Wisma Atria (both retail and office), Ngee Ann City (office), Myer Centre Adelaide and its China property, but partially offset by improved performances from Malaysia, Ngee Ann City (retail) and David Jones Building.

DPU for the quarter came in at 1.18 S cents, which represented a decline of 6.3% YoY. This was partly due to a larger S$1.4m of income available for distribution which was retained for working capital purposes (3QFY16: S$475k).

On a 9MFY17 basis, SGREIT’s gross revenue decreased by 2.0% to S$162.7m and formed 73.2% of our full-year forecast. DPU slipped 3.9% to 3.74 S cents and made up 73.6% of our FY17 projection.

Operationally, SGREIT’s portfolio occupancy stood at 95.1%, as at 31 Mar 2017, slightly lower by 0.3 ppt QoQ. Wisma Atria (retail) saw lower shopper traffic and tenant sales of 7% and 2% YoY, respectively.

On the other hand, its Singapore office portfolio was affected by a softer trading environment and competitive pressures. Malaysia performed well due to contribution from the ~6.7% rental uplift secured from the renewal of the master leases in Jun last year.

On another positive note, SGREIT’s gearing remained healthy at 35.3%, with 99% of its borrowings hedged. We maintain BUY and S$0.82 fair value estimate on SGREIT.

Source: OCBC Research - 28 Apr 2017