Starhill Global REIT (SGREIT) reported another weak set of 4QFY18 results but this came in within our expectations. Gross revenue and NPI fell 3.9% and 3.3% YoY to S$51.6m and S$40.0m, respectively. This was attributed to lower contributions from its office portfolio, lower revenue from Wisma Atria Property (Retail), Myer Centre Adelaide (Retail) and its China Property.

DPU dipped 7.6% YoY to 1.09 S cents, representing its eighth consecutive quarter of YoY decline. For the full-year, SGREIT’s gross revenue declined 3.5% to S$208.8m and this formed 99.0% of our FY18 forecast. DPU came in lower by 7.5% to 4.55 S cents, and accounted for 99.2% of our 4.59 S cents projection.

SGREIT recorded portfolio revaluation losses amounting to S$22.7m in FY18 and this was seen across its entire portfolio, with the exception of its Japan properties. On the retail front, Wisma Atria saw its tenants’ sales and footfall declining by 3.9% and 12.7% YoY in 4QFY18, respectively, partly due to tenants’ renovations.

In terms of balance sheet, SGREIT’s gearing was stable at 35.5% (+0.2 ppt), as at 30 Jun 2018. Following the purchase of new interest rate swaps to replace those maturing in 2018 largely for the S$460m four-year and five-year term loans drawn in Sep last year, SGREIT has ~96% of its borrowings hedged.

We will speak to the REIT manager to get more details. Currently, we have a HOLD rating and S$0.65 fair value estimate on SGREIT.

Source: OCBC Research - 30 Jul 2018