Starhill Global REIT (SGREIT) reported its 3QFY19 results which came in within our expectations. Although gross revenue and NPI fell 0.9% and 1.8% YoY to S$51.3m and S$39.6m, DPU rose 0.9% to 1.10 S cents due largely to lower income tax expenses and a higher payout ratio of 95.8% (3QFY18: 93.7%). We note that DPU grew positively on a YoY basis for the first time since 2QFY16, albeit from a low base effect.

For 9MFY19, SGREIT’s gross revenue declined 1.8% to S$154.3m; NPI slipped 2.2% to S$119.5m, while DPU was down 2.3% to 3.38 S cents and this formed 73.3% of our FY19 forecast. The decline was largely attributed to weakness at Wisma Atria (both retail and office) and in Australia.

For Wisma Atria Property (Retail), physical occupancy fell 1.8 ppt QoQ to 91.7%, but committed occupancy was much higher at 99.0%, albeit at a softer rent.

Encouragingly, tenants’ sales rose 4.9% YoY and this was the second straight quarter of positive growth. Other positives came from the uplift in actual occupancy for Myer Centre Adelaide by 5.5 ppt QoQ to 89.9%, as the new anchor tenant for its office component commenced its lease.

We will provide more updates after the analyst briefing. For now, our BUY rating and S$0.75 fair value is under review.

Source: OCBC Research - 26 Apr 2019