• Starhill Global REIT’s FY18 DPU of 4.55 Scts (-7.5% y-o-y) was below expectations at 90% of our forecast.
• Weak retail and office performance in Singapore and Myer Centre in Adelaide were the key drags.
• FY19-20F DPU cut by about 8%. Maintain HOLD; Starhill Global REIT’s near-term earnings growth remains sluggish.

4QFY6/18 Results Highlights

Starhill Global REIT posted a 7.6% y-o-y decline in 4QFY6/18 distribution income to S$23.8m (DPU 1.09 Scts). Group revenue declined 3.9% y-o-y to S$51.6m due to weaker office rentals, and lower revenue from Wisma Atria Property (retail), Myer Centre Adelaide and China properties. NPI declined a lesser rate of 3.3% y-o-y due to lower expenses mainly from its China property, Plaza Arcade and Wisma Atria Property (retail). 

Overall portfolio occupancy declined 1.3% pt y-o-y in 4Q to 94.2%. 

As for FY6/18, distribution income fell 7.5% y-o-y to S$99.2m (DPU: 4.55 Scts), representing a 96.2% payout.

Weaker Singapore Retail and Office Segments

While Wisma Atria's retail occupancy rate remained high in 4QFY18, revenue declined 3.7% y-o-y on lower tenant sales and shopper traffic, partly affected by tenants’ renovations. Meanwhile, the retail performance of Ngee Ann City was largely stable on the back of Toshin as its master lessee. 

Overall Singapore office revenue declined 5.3% y-o-y in 4QFY18 on lower average occupancies.

Source: CGS-CIMB Research - 30 Jul 2018