StarHill Global – Lim and Tan

• The key point in The Edge’s story on Starhill Global is its high dependence on master leases, which essentially means there is little direct benefit from asset enhancement initiatives to be undertaken.

• Starhill’s 4 key assets are: 27% of Ngee Ann City (NAC; and accounting for 31% of group Net Property Income), Starhill Gallery, Lot 10 (two retail malls in Malaysia acquired from YTL in 2010 / 21% of NPI) and 74% of Wisma Atria (27%).

• Only the last does not have a master lease, and the one that is undergoing refurbishment presently at a cost of $30 mln.

• Take NAC: while Toshin of Japan’s current lease may run out in 2013, it has the option to renew for another 12 years. And why should it it not renew, given the popularity of the Takashiyama store.

• Starhill also has assets in China (9% of NPI), Australia (8%) and Japan (4%)

• In the retail reit sector, we maintain our preference for CapitaMall Trust ($1.88 on Friday, unch) and Fraser Centrepoint Trust ($1.48, up 2), even though Starhill offers higher yield of 6.3%, and the lower price-to-book of 0.7x. Corresponding numbers for CMT and FCT are 4.9% / 1.23x and 5.3% and 1.23x respectively.