Category: StarHill
StarHill Gbl – DBS
Earnings growth from David Jones
At a Glance
• DPU of 0.97 Scts for 4Q09
• Retail income to support weakening office revenue
• Maintain Buy, TP $0.66
Comment on Results
DPU of 0.97 Scts. Gross revenues and net property income grew by1.5% and 3.2% to S$34.3m and S$26.8m respectively. Growth was largely contributed from stronger retail revenues from its Singapore and China properties, offset by weaker performance at its office space. Distributable income came in at $19.1m, which is a 5.5% yoy increase, translating to a DPU of 0.97 Scts. The group also wrote their book up slightly by S$25m or 1.4% – NAV per unit stands at S$0.82.
Retail portfolio to offset weakening office space. SGReit’s office portfolio is expected to face downward pressure on rents from 2010 as negative rental reversions starts to kick in. The group expects to renew a total of total of 47.2% of its office NLA over 2010-11. Current rents are ranging between $7-9psf/mth compared to the expiring levels of c$10psf. The drag is likely to be offset by income from its retail portfolio and new contributions from the David Jones property in Australia. Retail rents are expected to be underpinned by the pick up in retail sales on the back of an improving economy, anticipated increase in tourist arrivals and absence of new supply (in view of the strong absorption of the new stock). Income from the acquisition of the David Jones asset should be felt from 1Q10 with the recent completion of transaction.
Recommendation
We maintain our Buy call with TP at $0.66. SGReit remains one of the major beneficiaries of the improved tourism outlook with the upcoming opening of the 2 IRs and is well-located malls in the heart of the Orchard Rd shopping belt. The stock is offering FY10- 11 DPU yield of 7.2-7.4% and 0.64x P/bk NAV.
StarHill Gbl – BT
Starhill’s Q4 DPU up 5.4%
STARHILL Global Real Estate Investment Trust posted a 5.5 per cent increase in income available for distribution to $19.1 million for its fourth quarter ended Dec 31, 2009, from $18.1 million a year ago.
Income to be distributed rose 5.6 per cent to $18.8 million. An amount of $0.3 million of income available for distribution for the quarter had been retained to satisfy legal reserve requirements in China.
Distribution per unit (DPU) rose 5.4 per cent to 0.97 cents from Q4 2008’s restated 0.92 cents. Q4 2008’s DPU was restated to take account of rights units.
In August last year, Starhill, which owns stakes in Wisma Atria and Ngee Ann City, had completed a rights issue which had raised net proceeds of $326.1 million.
For the year, net income available for distribution rose 8.7 per cent to $75.5 million.
After retaining about $2 million to satisfy the legal reserve requirements in China and for working capital and capital expenditure purposes, net income to be distributed stood at $73.5 million, up 7.2 per cent from $68.6 million in 2008.
DPU for 2009 stood at 3.8 cents, up 6.1 per cent from 2008’s 3.58 cents, which again took into account the rights issue.
Net property income for the quarter rose 3.2 per cent year-on-year to $26.8 million, driven by increased revenue from new leases and lower property tax expenses.
For the year, the group posted net property income of $106.9 million, an 11.5 per cent increase from $95.9 million.
As at Dec 31, 2009, the trust’s gearing ratio was 26.9 per cent. The manager of the trust is in ‘active discussions’ with its banks to finalise terms for the refinancing of $570 million of debt that falls due in September.
The group’s outlook for the year is a cheery one.
‘Business sentiment has improved significantly over the last quarter. The completion of our acquisition of the David Jones Building in Perth earlier this month is timely, as the property will start contributing immediately to Starhill Global Reit’s FY2010 revenue and net property income,’ said Francis Yeoh, executive chairman of YTL Pacific Star.
‘Visitorship to our Singapore malls have continued to improve with the added buzz arising from new malls and the rejuvenation of Orchard Road and we expect this to increase in tandem with tourist arrivals when the integrated resorts open.’
Its retail assets in Singapore are expected to mitigate the effects of retail rents and occupancy rates in Japan that might still be reeling from economic weakness. Starhill rose 1.5 cents to close at $0.545 yesterday.
StarHill Gbl – DBS
Going Global
• Deploying its cash
• Potential issue of convertible equity could cap share price performance
• Maintain HOLD, TP S$0.65
Deploying cash. Starhill Global REIT (SGREIT) has finally announced the deployment of its war-chest : (i) acquisition of David Jones Building (DJB) in Perth for S$148m; and (ii) signing of heads of agreements to purchase Lot 10 and Starhill Gallery for S$423.3m from Starhill REIT. The combined injection yield is estimated to be c7.2%, which compares favorably to the current yield on book (5.5%).
Australian acquisition raises DPU by 6%. We have included the DJB acquisition in our numbers; raising FY10F-11F DPU by c6%.
Still assessing funding options for Malaysian purchases. The manager intends to utilize an asset backed securitisation structure (“ABS”) to acquire the Malaysian assets given tax benefits. This structure is awaiting further regulatory approvals. SGREIT intends to use a combination of its cash from the rights issue (completed back in 2Q09) and to issue new convertible preference units (CPS) but has yet to decide on the terms and size. We have not included earnings from the Malaysian assets in our forecast.
Maintain HOLD, TP S$0.65. While size of the acquisition is big (26% of portfolio), the uncertainty of the funding for the larger-sized Malaysian assets could cap share price performance in the near term till further clarity is obtained. As such, maintain HOLD.
Starhill – BT
YTL Pacific Star, the Manager of Starhill Global REIT said on Wednesday that Starhill Global REIT plans to acquire David Jones Building in central Perth, Australia for A$114.5 million (about S$148.0 million) from Centro, a fully integrated real estate company based in Australia.
The company added that a heads of agreement has also been entered into with the trustee of Starhill REIT of Malaysia, to indirectly acquire Starhill REIT’s interests in Starhill Gallery and Lot 10 Shopping Centre on Bukit Bintang, Kuala Lumpur’s main shopping street, through an asset backed securitisation (ABS) structure, for a total of RM1,030 million (about S$423.3 million).
The proposed Australian acquisition is expected to be completed in January 2010 and will be funded by a combination of debt and proceeds raised from Starhill Global REIT’s recent rights issue.
The acquisition is expected to be accretive to Starhill Global REIT’s distribution per unit (DPU). The pro forma financial effect of the acquisition on the DPU for the financial year ended 31 December 2008 is an additional 0.22 Singapore cents per unit.
With the signing of the heads of agreement for the acquisition of the properties in Malaysia, both parties agree that they shall negotiate in good faith and use their best efforts to finalise the definitive agreements in relation to the properties. Further details will be announced at the appropriate time in due course.