Starhill Global: Latest news regarding legal proceedings of grp and Toshin over rental review mechanism for Tohisn master lease has seen the High Court granted liberty to both parties to apply to Court should there be a dispute vis-à-vis the terms of the parties’ joint letter to the SG Institute of Surveyors and Valuers, to nominate 3 valuers.
CIMB maintains O/P on REIT with $0.68 TP, noting that REIT offers attractive yields, at 7% yield, and with increased macro-economic uncertainties, seek comfort in the stability offered by REIT’s master and long leases and strong balance sheet. Starhill remains the cheapest retail S-REIT under house coverage at 0.7x P/B. Though rental uplift for its Toshin master lease is a key source of growth, believe all will not be lost even if this fails to come through, as the impact mitigated by other sources of growth.
Looking beyond Toshin, house gives an under-rented lease, expect Starhill to be successful in negotiating for rental increases and have factored in a 10% uplift. Mgt remains on the lookout for acquisitions, more so in this environment as asset pricing could be more moderate. With debt headroom of $450m to a gearing target of 40%, see DPU accretion of 1-12% for debt-funded acquisitions.
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