Sunday, January 6, 2019

Starhill Global Reit - Should See Better Days Ahead

SPH Reit's recent Q1FY19 results show something promising for the retail rent sector as they managed to negotiate for a 10.1% positive rental reversion for the renewed leases that expire in Q1FY19 for the Paragon properties.

The Orchard central area continues to bounce back strongly on the back of strong high occupancy and the low supply pipeline for the next upcoming 5 years.

This is the latest I have extracted from the URA website.


The office space is doing well from what we see on the price and rental index, but that only takes up 5% of the total NPI for Starhill, so that isn't very significant.

The biggest move would need to come from the Singapore retail from their Wisma Atria and Ngee Ann City properties, which takes up 50% of the total NPI.

If this moves, the share price will move accordingly, usually in the same correlation.

Thus, my turnaround play would have to depend on this one.


Starhill has a next Toshin rental review in Jun 2019, which I think will be the key for a positive rental reversion that follows that to SPH Reit.

I think we should see better days ahead for Starhill performance.

This is just a quick update but an incomplete analysis of the stock.

And I think at 6.6% yield currently, it is an opportunity for investors to keep accumulating.

*Vested and will continue to accumulate

Thanks for reading.

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18 comments:

  1. Hi! Completely agree. I hold SPH and plan to add more under 1$, hoping it will happen anytime soon. I hold SGR as well and plan to buy more under 65-66 and hold Long term. Seletar Mall is waiting in the wings and we need to see the Rail mall contribution for SPH Reit at the next result. SPH Reit has a very Low under 30% gearing when i last checked and this will help. Of course the yield is under 5.6% or so. This will increase only with more bold acquisitions but the current retail climate us far from friendly! SGR might benefit from central area office space demand as well. Fingers crossed but hoping to gain from both these. Thanks for posting!

    ReplyDelete
    Replies
    1. Wah you have both sph reit and also starhill.

      I used to have fct for a long time last time too and it never fails to disappoint... I blame it on my itchy hands to sell it away.

      Delete
    2. I partially divested FCT at 2.19 last year. I will add more at 2.15 and below with next pullback. Let us see what happens!

      Delete
  2. Not really. Despite positive rental reversion, SPHR occupancy and profit dropped. SPHR had to increase payout ratio to maintain the same DPU. The situation is not optimistic at all.

    ReplyDelete
    Replies
    1. I assumed you are talking about the overall Sph Reit portfolio on the occupancy.

      For me I'm only interested in the rental reversion info and occupancy from Paragon asset.

      Delete
  3. Will wait and see this quarters results that are due anytime now and decide. The Low hearing is still s major plus for future acquisitions as the interest cycle will turn down. Paragon Rents are up only recently, so next few quarters will reflect NPI- let us see!

    ReplyDelete
    Replies
    1. Yes agree. The next rent review won't be u til Jun 19 so we will still at least 2 quarters of under performance results which might define things.

      Delete
  4. Hi , do you still hold Sasseur Reit ?

    ReplyDelete
    Replies
    1. Hi I sold sasseur at a 8% loss.

      Will update my latest portfolio from this month onwards.

      Delete
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  9. Hi was looking through the top 10 contribution to gross rent and saw that YTL group contributed to 15%. What is your opinion on this since YTL manages Starhill Global REIT also?

    ReplyDelete
  10. Hello, i am also vested in Starhill, albeit only a small fraction of my portfolio.

    My concern with SG Reit is that footfall is falling in orchard. And there is nothing to suggest that this trend would reverse in the long run. Traditional retail is dying a slow death. Hence, I am not as optimistic about this counter.

    Paragon is also not directly comparable with Wistma because Paragon has a niche set of tenants specializing in medical/aesthetics, which would continue to ensure human traffic having SES at the high end of the spectrum. There is no such niche play with Wistma.

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    ReplyDelete
  11. Hi Edwin

    I saw that you have 20,000 shares of starhill in your portfolio, not small at all :)

    Actually I think traditional retail is slowly evolving. If we see what retailers are up these days with experiential shopping like what cmt did with their plaza singapura concept then I think it might just revive.

    HK retail is a good example how they can innovate and brand themselves as a mall which gives a very good rental reversion to their malls.

    I agree Paragon may be a little different with Wisma but given the closest comparison, Paragon and Plaza Sing are probably the easiest to compare to with public information. I still think starhill will play a good catch up to the current valuation of cmt though.

    ReplyDelete
  12. I agree with you regarding Starhill. Further, Wisma and premium Orchard properties will command real estate value and are a buffer to shore up book value plus potentially fetch good prices if need to be sold. However, the entry price for SGR needs a bigger margin of safety. The overseas assets are facing an unfavourable currency exchange situation as well. I am waiting in the rings to add more but will do only at around 65 cents or so. It is still slightly risky but worth it!

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