Starhill Global REIT Weak 3QFY19/20 Financial Results

Starhill Global REIT Lot 10

Starhill Global REIT had announced their 3QFY19/20 financial results on 28th April 2020. In my opinion, the financial results are weak but not all is lost as I observe a few catalysts that can boost its earnings in the future.

Starhill Global REIT currently has assets in Singapore, Malaysia, Australia, China and Japan. We all know that the COVID-19 pandemic has affected the world and not solely Singapore.

As heightened social distancing measures were implemented in Australia, tenants such as Myer and UNIQLO had to temporarily close their stores.

Movement Control Order (MCO) kicked in Malaysia on 18 March 2020 caused Starhill Gallery and Lot 10 Property to be largely closed.

In Singapore, the “circuit breaker” measures announced by the government on 3 April 2020 will be extended to 1st June 2020 and only essential services within Ngee Ann City and Wisma Atria are allowed to operate.

In 3QFY19/20, Gross Revenue fell 8.9% to S$46.7 million. Net Property Income (“NPI”) fell 11.1% to S$35.2 million. The decline in revenue and Net Property Income (“NPI”) for 3Q FY19/20 was mainly attributed to the rental assistance extended to tenants in Singapore, Malaysia and China to assist tenants in cushioning the impact of the COVID-19 pandemic, as well as depreciation of A$ against S$.

3QFY19/20 Financial Results

3QFY19/20
(S$’mil)
3QFY18/19
(S$’mil)
YoY(%)
Gross Revenue46.751.3(8.9%)
Net Property Income35.239.6(11.1%)
Distributable Amount 24.025.0(4.1)%

No Distribution Per Unit (“DPU”) was declared as Starhill Global REIT had changed its distribution frequency to semi-annual distribution. Approximately S$1.0 million of income available for distribution for 3Q FY18/19 has been retained for working capital requirements.

Occupancy

As of 31st March 2020, the occupancy for Singapore retail portfolio stood at 99.5%. Ngee Ann City Property (retail) remains fully occupied. The Singapore office portfolio occupancy stood at 87.4%.

Starhill Global REIT’s Australian office portfolio occupancy stood at 94.8% while its retail portfolio stood at 94.3%.

Starhill Global REIT Occupancy

Debt

As of 31st March 2020, gearing ratio stood at 36.7% which is at healthy levels.

Starhill Global REIT Weak 3QFY19/20 Financial Results

Current Dividend Yield

Based on the current share price of S$0.48 and 4.48 cents paid out in FY18/19, this translate to a current dividend yield of 9.33%. The reason for high dividend yield is because the share price is depressed but do take note that the annualized dividends are also declining year on year.

Starhill Global REIT Weak 3QFY19/20 Financial Results

Summary

Starhill Global REIT currently makes up 9% of my wife’s stock portfolio. I can see that the manager is making some effort to improve the overall performance of Starhill Global REIT.

For example, the manager had baked in long-term leases with periodic rental step-ups under renewed master lease agreements for Starhill Gallery and Lot 10 Property. This is similar to its China property whereby the next rent step-up is actually in this month April 2020 for its sole tenant Markor International Home Furnishings Co., Ltd. Chengdu Zongbei Store.

While the retail market remains weak, it might pose a good opportunity for Starhill Global REIT to rejuvenate its assets across different countries for the future.

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