Starhill Global REIT

Starhill Global REIT: Maybank KE feels more positive about the REIT’s asset quality, defensive lease structures and financial handling, post last week’s NDR. Management said that a 100-200 bps rise in borrowing costs will shave 2-2.5% off its DPU; a 10% drop in forex exposure (JPY, AUD, CNY, MYR) will see a dip no more than 5%. Management also explained that the higher occupancy costs by prime Orchard Road malls are offset by higher efficiency. In turn, lower traffic at Orchard relative to suburban malls does not translate to lower sales in the former, due to the said higher efficiency of the former. In Malaysia, management is eyeing ~6.8% increase in rent when the master tenancy with Katagreen Development for Starhill Gallery and Lot 10 is up for review in 2016. For Australia, it expects rent for the David Jones Building to go up by 6% in Aug 2014. SGREIT is currently trading at 0.85x P/B. Maybank KE maintains Hold with unchanged TP of $0.84