Starhill Global REIT - RHB Invest 2024-08-27: On Firm Footing; Buy

• Starhill Global REIT (SGX:P40U) has navigated the high interest rate environment well, with steady operational improvements and active debt management. The extension of two key master leases for long periods has removed a key overhang, and we expect a favourable outcome from the Myers arbitration.
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Mid-high single-digit rent reversion

• Mid-high single-digit rent reversion for Singapore retail and office assets are expected to continue in FY25.
• Tenant sales and shopper traffic at Wisma rose ~7% and 13% (better than peers), indicating an uplift from asset enhancements and the new MRT opening. New retail tenants include a mix of new-to-market fashion brands, jewellery, and F&B players, while office demand came from luxury retailers and medical tenants.
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Modest gearing of 36.8%

• Modest gearing of 36.8% provides room for selective accretive acquisition opportunities for Starhill Global REIT.
• Management has indicated its preference for office assets in markets such as Japan and Australia (Brisbane) at the right price and opportunity. It also remains open to divest office strata lots at Wisma Atria at a good price, in order to recycle capital.
• Currently, the office portfolio accounts for ~15% of Starhill Global REIT’s overall revenue, and we believe this could increase to 30-50% in the medium term.
• Financing costs are likely to peak at ~4% (currently 3.8%) with 79% of its debt currently hedged.

Asset enhancements for Wisma Atria

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Vijay Natarajan RHB Securities Research | https://www.rhbgroup.com/ 2024-08-27 SGinvestors.io

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