Starhill Global REIT (SGREIT) reported a lacklustre set of 3QFY18 results which missed our expectations. Gross revenue and NPI fell 3.0% and 2.3% YoY to S$51.7m and S$40.3m, respectively. This was attributed largely to lower contributions from the office portfolio and Myer Centre Adelaide, coupled with disruption of income at Plaza Arcade due to redevelopment works.

DPU slipped by a larger magnitude of 7.6% YoY to 1.09 S cents as there were also higher withholding taxes. This formed 22.4% of our FY18 forecast.

On a 9MFY18 basis, SGREIT’s gross revenue declined 3.4% to S$157.2m and constituted 72.4% of our FY18 forecast. DPU of 3.46 S cents represented a fall of 7.5% and accounted for 71.1% of our full-year projection. Overall portfolio occupancy was 94.3%, a slight dip from the 95.5% recorded in end-2QFY18.

On the retail front, Wisma Atria saw its tenants’ sales and footfall declined by 3.0% and 7.2% YoY, respectively, partly attributable to tenants’ renovations. In terms of balance sheet, SGREIT’s gearing was stable at 35.3%, as at 31 Mar 2018, unchanged QoQ.

For now, we have a HOLD rating and S$0.77 fair value estimate on SGREIT.

Source: OCBC Research - 27 Apr 2018