StarHill Gbl – DBS

Not Shining yet

Starhill Global Reit (Starhill) reported FY08 results in line with expectations. Unitholders will receive DPU of 7.17 cts , translating to a 14% yield. Looking ahead, while we view that the trust should be able to deliver relatively stable DPU, headwinds from weaker consumer discretionary and tourism spending could limit re-rating opportunities in the near term. As such, maintain HOLD, TP$0.60

Results in line. Starhill Global Reit (Starhill)’s FY08 distributional income of S$69.4m, DPU of 7.17 Scts were in line with expectations. Gross revenues and gross profits increased 24% and 25% to S$127.0m and S$95.9m respectively, driven by (i) higher rentals achieved through FY08, (ii) 19.75% Toshin kicker from Jun’08.

NAV of S$1.44. The trust recorded a revaluation loss of S$160.9m on its properties, resulting in a NAV of S$1.44, compared with S$1.61 a year ago. Gearing inches up slightly to 31%, which remains relatively low amongst the SREIT space.

FY09-10 DPU yield of c.14%. Moving ahead, we estimate DPU yields to remain relatively stable, as the reit enjoys the full year contribution from the positive Toshin rent review which offsets our estimated 5% drop in portfolio occupancies and a 20%-10% fall in asking rents its office space and retail space respectively.

HOLD, TP S$0.60. Re-rating catalyst appears lacking in the near term, due to anticipated worsening newsflow of a further tightening of consumer and tourist spending. Our DCF-based TP is adjusted slightly upwards to S$0.60 as we roll forward our numbers.