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.

Screening For Dividend Stocks In March 2020

Screening For Dividend Stocks In March 2020

The stock market crashed this week on further news of the spread of the COVID-19 virus and also the oil price war between Saudi Arabia and Russia. Due to the continued bad news, the Straits Times Index (STI) fell as much as 6.03% on Monday, 9th March 2020. As you can see from the chart below, the Straits Times Index (STI) crashed further on Friday, 13th Mar 2020 before rebounding slightly at the end of the day.

During such crisis, there is an opportunity to start picking up quality stocks that can climb back and continue its growth when the stock market normalize in 1 or 2 years time (I guess).

If you had followed my blog, you know that I always have my stock screener ready to identify stocks that gives me a good dividend yield. When stock price goes down, the current dividend yield goes up.

The stock screener offered by Stocks Café allows me to save the conditions that I can pre-set. You can check out my review here on the Stocks Café Dividend Stocks Screener (Read more: Screening For Dividend Stocks Using Stocks Cafe Stock Screener).

Screening For Dividend Stocks In March 2020

Below are the top dividend yielding stocks as of 14th March 2020.

NameCurrent Yield %P/EP/BMarket Cap
Cromwell REIT SGD9.4949.320.8481.7B
Mapletree NAC Trust8.6515.110.7033.2B
OUE Commercial REIT8.48713.730.6332.1B
Ascendas-iTrust8.3615.471.1211.4B
CapitaRetail China Trust8.257.750.7741.5B
CDL Hospitality Trust8.05412.040.7351.4B
Starhill Global REIT7.75719.360.6511.3B
Far East Hospitality Trust7.18916.770.6131B
Frasers Commercial Trust6.8098.580.8611.3B
Yanlord Land6.7332.970.3582B
Frasers Logistics & Industrial Trust6.66710.271.1062.4B
Ascendas REIT6.52419.11.39210.9B
UOB6.4557.730.84833.4B
SPH6.38315.020.883B
DBS6.3577.741.00949.2B
Yangzijiang Shipbuilding SGD6.2895.10.5193.1B
Suntec REIT6.25510.850.7124.3B
Hong Leong Finance6.2510.40.5611.1B
SPH REIT6.16414.570.972.5B
TCIL HK$6.11710.780.343.8B
OCBC Bank5.8438.020.87439.9B
ComfortDelgro5.72513.971.4273.7B
SIA Engineering5.55611.611.4352.2B
CapitaMall Trust5.49111.531.0358B
Jardine Cycle & Carriage5.4097.450.9719B
Bukit Sembawang5.37913.450.7911.1B
Olam International5.2989.450.8934.8B
SATS5.27817.892.4874B
Genting Singapore5.14711.911.0188.2B

Last, I just want to mention again that the above list is for reference only and we should do our homework before buying into the stock simply for the dividend yield.

Starhill Global REIT Downgraded To BBB

Starhill Global REIT Downgraded To BBB

Three years ago, I wrote about Soilbuild Business Space REIT being given a Baa3 credit rating by Moody’s. (Read more: What is meant by Baa3?) Today, I receive an email notification that Starhill Global REIT has been downgraded from a credit rating of ‘BBB+’ to ‘BBB’ by Standard & Poors (S&P). This is an indication that something isn’t right even though it is not a recommendation to buy or sell.

My wife currently held 9% of Starhill Global REIT in her stock portfolio. In FY2019, Distribution Per Unit (DPU) declined 1.5% from 4.55 cents in FY18 to 4.48 cents in FY19.

Here are a few noteworthy points from the S&P report:

  • Starhill Global REIT is facing pressure in rent reversions in its key Singapore assets amid weakened economic conditions.
  • Funds from operations (FFO) to debt to decline to 7.6%-7.8% in fiscals 2020 and 2021.
  • Ngee Ann City’s master tenant’s rent review in June 2019 resulted in rents remaining flat (Read more: Starhill Global REIT Decides Not To Increase Toshin New Base Rent)
  • Contributions from Starhill Global REIT’s Australia assets were weighed down by the depreciation of the Australian dollar against the Singapore dollar.
  • Starhill Global REIT is performing AEI on Starhill Gallery Mall in Malaysia. The rental rebates agreed by Starhill Global REIT will weigh down rental performance at these assets.

The outlook doesn’t seem good which might place further pressure on the Distribution Per Unit (DPU).