Starhill Global

Starhill Global: First quarter results were in line with street estimates, with an increase of 28% y/y on its DPU of 1.37¢, on the back of a 29.2% increase in revenues to $53.6m and a 12.3% increase in NPI. The increase was largely due to a 10% increase in rent from the Toshin rent review at its Ngee Ann City mall, of which resulting arrears from June 2011 – Dec 2012 were received in the quarter. Excluding the rental arrears payout, DPU would have increased 10.3% y/y to 1.18¢, still considerably well. NPI margin for 1Q13 fell 1ppt to 78%, as a result of higher property taxes and operating expenses. Gearing increased marginally to 30.5% as of 1Q13, vs. 30.3% as of 4Q12. The REIT’s average cost of debt decreased to 3.1%, down from 3.2% in 4Q12. SGREIT’s gearing remains fairly low in relation to its peers. Both Wisma Atria as well as Ngee Ann City achieved 100% occupancy for both retail and office this quarter, as the Singapore portfolio performance made up for weaker overseas portfolio as revenues from JP dipped 14.7% q/q to $1.5m, due to the sale of Roppongi Primo in Feb 2013 and the depreciation of JPY. Its exposure in Chengdu saw increased competition and a weakened retail market appear to have impacted the Renhe Zhongbei mall; revenues declined 7.8% y/y to $4.0m and NPI declined 12.8% y/y to $2.5m. Starhill adopts a natural currency hedge strategy (capital hedge), which maximises the use of local currency denominated borrowings, whenever possible, to match the currency of the asset investment. SGREIT is currently trading at 1.0x P/B, FY13F DPU yield of 5.0%; Retail reit peers are trading at 1.28x P/B, 4.9% yield.