Starhill Global

Starhill Global: Announced strong 2Q11 results, which were broadly in line with expectations. Property Income at $35.6m, +18.9% yoy and flat qoq, while DPU at 1.04c, +14.3% yoy and flat qoq. Strong yoy increase primarily attributed to contributions from Starhill Gallery and Lot 10 in Msia, which were acquired in Jun10.

Grp continue to see positive momentum for retail spending in Asia, driven by healthy economic and job prospects. For SG, note that occupancy for Wisma office rose to 92% while that of Ngee Ann office maintained above 95%, though negative office rental reversions continue to set in with transacted rents below 2007 peak levels. Retail space at Wisma and Ngee Ann remained healthy at 98% and 100% occupancy. For Overseas property, Grp’s portfolio in China and Aus saw full occupancy, while its Jap portfolio saw Overall committed occupancy at 78.9.

We note that at current price, valuations are compelling, trading at 0.70x P/B, yield 6.4% and gearing at 30.2% vs (SGX REITs average of 1.02x P/B, yield 5.2% and gearing at 38%). Interest coverage stood at a strong 4.4x. Going forward, grp remains positive on outlook, tipping growing consumer spending and rising tourism numbers to support demand for prime retail space and cited SG and China’s 2nd tier cities as possible avenues for acquisitions. Macquarie maintains neutral with $0.65 TP, Daiwa maintains O/p with $0.85 TP and CIMB maintains O/p with $0.74 TP.