StarhillGbl Reit FY2018/2019 Q1 Results

I was skeptical that the AEI can contribute much to the DPU. Q1 StarhillGbl Reit FY2018/201, DPU drop 4.2% to 1.15cents Y-on-Y. Some people mentioned that its an increase Q-on-Q. However, past years DPU shows that Q1 always give out higher DPU and Q4 the least. Hence we cannot compare Q-on-Q.

Upon facing more decline in DPU, StarhillGbl Reit also has more than 1/4 of its lease expiring in this new fiscal year. This is a huge amount of lease, tenant move out will be bad news. Keeping the rental reversion flat is also bad for shareholders.

StarhillGbl Reit performance has been bad for consecutive for the 3rd year. AEI doesn't improve the DPU. Huge expiring leases. Probably will avoid this reit, if I have to set a TP, base on a further decline of 4-5% this year,  with 10% MOS, it gives a TP of $0.575.

Heading Typo, should be all FY17/18

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StarhillGbl Reit FY2017/2018 Results

Starhill Global Reit Released it's latest 4th Quarter and Full Year Results ending FY2017/2018. DPU Q-on-Q remain flat. Full year DPU at 4.55cents versus my earlier estimate of 4.56cents.

Positve

- Office at 95% occupancy rate, up from 91% in 3rd Quarter.

- AEI at Plaza Arcade is completed. From my estimate, it should provide a increase of 0.17cents of DPU for FY2018/2019. UNIQLO to open its store in 3rd Quarter 2018.

- DPU drop may have bottomed as Q-on-Q is flat. The drop in Y-on-Y should not be as drastic for next FY. AEI upside of 0.17cents should provide some support.

Negative

- DPU performance remains challenging.

Conclusion

DPU may have bottom as the higher withholding tax in Malaysia has been priced into the DPU. Going forward in comparison Y-on-Y between FY2017/2018 and FY2018/2019, if any fall in DPU should no be as drastic. Estimated 0.17cents upside from AEI of Plaza Arcade could provide some support. 

Below are some estimates of 3 possible rate of decline of 5%, 2.5% and 1%. Judging from the table above, I would look at 5% as the max possible decline as a MOS, to have 7% yield, TP of 0.64.

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High Yield Stocks on My Radar Now

Ascendas Hospitality Trust

My favorite pick. Read all about it. Forward yield of 7.5% at current price of S$0.77. Have no reason for it price to drop.

Frasers Commercial Trust

HP vacated part of its office at Alexandra TechnoPark (ATP) in FYQ4 2017 and FYQ1 2018. DPU maintained at 2.40 cents since. HP to fully vacated ATP by Sept 2018. Assuming with AEI and rental space back-fill improves, 2.40 cents should maintain. which give a 7.05% yield at a price of  $1.36. with up to 10% MOS. TP is S$1.23 to S$1.29.

StarhillGbl Reit

On my last take on StarhillGbl Reit, yield is at 7.27% with a price of S$0.65, estimate DPU  of 4.73 cents adjusted for possible DPU reduction and effects from AEI. If I demand a 7% yield with up to 10% MOS. TP is S$0.61 - S$0.675.

Sasseur Reit

Go into outlet retail growth in china as middle class grows. China being so big should have no issue to grow as big as US/EU. Estimate 6 cents DPU from FY2019, current yield 8.1% at a price of S$0.74. Current trend is bearish, price been tanking since IPO. Another 10% MOS will be S$0.675

Capitaland Retail China Trust

Singapore Retail Segment is facing headwinds from online shop, most mall now have cater to more F&B outlets. However China's retail segment has a better prospect as middle class grows and spend more. From the past 1st Quarter results, the recent placement (an increase of 10% shares) has diluted the DPU. the current DPU is supported by the capital distribution from a portion of the gain from the disposal of Anzhen.  Probably why the price tanked since FYQ4 results was released

Forward looking: The Joint venture acquisition of Rock Square reported renewal revision of more than 20%. More than 50% of expiring leases are expect to renew from 2018 to 2020

Current Yield of 6.8% with the price of S$1.48. Demanding 7% yield with up to 10% MOS, TP will be S$1.3 - S$1.44

M1

M1 drops further. And while everyone joked about it falling to S$1.68 in forum and social apps, most are just joking but the price high a new low of  S$1.51, giving a yield of 7.55%. Price had since rebounded. But I doubt it is the end of it as TPG launch is approaching. dividend of 15.3 cents in 2015 has drop to the current 11.4 cents, that is a 25.5% over 2 years.

At its peak on 22/2/2015 of S$3.96, dividend was 18.9, 4.7% yield. The price was pushed up by the increase in dividend, obviously M1 will not be able to payout that amount anymore. Price of course has come down and are still being corrected. We would need to see a stabilize dividend and that is not gonna happened until we see how TPG will impact its profits.

Demanding a 7% yield, TP will be at S$1.62. assuming profit to be further hit 25% for the next 2 years. with a MOS of 25% to 30%. TP S$1.14 to S$1.22. Historically, M1 yield range from 4.3% to 7.1% (AR 2017). So it won't be unreasonable for M1 to have a price giving a yield of 4 to 5%.

UMS Holdings

Their Strong FCF still stands, promising the same amount of dividend will be of no issue, for the last 8 years. The world is going into the era of IoT. As these item become part and parcel of our life, it would not go away. Demand will soar and more tech products will be produced. Just like the internet did. Main customer Applied materials has been growing in double digit, this will create more demand from them.

With a dividend of 6 cents, give a yield of 7.19% at a price of $0.835. This is quite a nice price to get some.

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Taking a look at StarhillGbl Reit

Positive

- almost 91% Singapore office occupancy rate with committed lease in 3Q (01/2018 to 03/2018) above market rate but below expiring rents.

- China property handed over to Markor International Home Furnishings Co. with  periodic step-up rent structure. Renovation to finished in 3Q. I assume no rent is collect yet as in FY 16/17, the property incur a loss.

- Assuming the  China property to have the same NPI as in FY15/16 of 2.6 million. It will contribute 0.12cents to DPU.

- Australia Plaza Arcade with its 41% expansion on AEI of 2000 sqm, of which 1200 is committed to anchor tenant UNIQLO's first Australia store. 

- If the AEI GLA if fully leased out and base on FY16/17 NPI from the property, NPI will increase by 0.96million (41% more GLA), which will contribute about 0.05cents to DPU.

- A total of 0.17cents upside to DPU a year or 0.042cents a quarter.

Negative

- Huge lease expiry next fiscal year 18/19. (SG properties)

- Plaza Arcade NPI for FY16/17 is 2.4 million which a 33% drop from FY15/16 although occupancy rate has risen from 74.5% to 94%(Ouch). 

- Can see that Plaza Arcade is doing very badly, property value is below purchase price.

Comparison

Only13% of StarhillGbl Reit's revenue are from offices, hence I will not compare it with Mapletree Commercial Trust nor Suntec Reit.


Price Base on 14/3/2018

	StarhillGbl Reit	CapitaMall Trust	Fraser Centerpt Trust
2013	6.85%	4.08%	4.97%
2014	7%	5.22%	5.09%
2015	7.1%	5.48%	5.28%
2016	7.13%	5.48%	5.36%
2017	6.7%	5.48%	5.41%
PB Ratio	0.78	1.06	1.1

   
StarhillGbl Reit  perform badly for the FY16/17 while CapitaMall Trust is stagnant while Fraser Centerpt Trust continue to grow.
 
Base on StarhillGbl Reit 1H result, yield for 17/18, estimate to have a drop in 7.4% or 0.36 cents to 4.56 cents in DPU. Yield should decrease to below 6.4%.

Conclusion

A estimated 0.17cents increase in DPU from AEI and new tenants seem lackluster and would not cover the 0.36 cents drop.

Assuming I can buy CapitaMall Trust and Fraser Centerpt Trust at NAV, I can get a yield of 5.8% - 6%. Therefore, it would be worthwhile to collect StarhillGbl Reit when yield is > 6%. With the dropping DPU, will only consider adding with a MOS near 6.6% yield or less than 0.70.

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