My Portfolio Review: Starhill Global Reit Earnings Report 2Q17/18

On 29 Jan 2018, Starhill Global Reit announced its results for 2QFY17/18. Gross revenue dropped by 3% year-on-year while net property income (NPI) fell by 2.2% over the previous year period 2Q16/17.  The fall in gross revenue was largely contributed by lower contributions from offices, disruption of income from ongoing asset redevelopment works at Plaza Arcade in Perth and weaker revenue at Myer Centre Adelaide. The drop in NPI for Starhill Global Reit was mainly as expected with the weaker gross revenue, somewhat mitigated by reduced expenditure largely for the China asset.

Distributable income for 2Q17/18 fell by 7.1% largely attributed to reduced NPI which includes the effects of rental adjustments and higher taxes for Australia and Malaysian assets. Distribution per unit (DPU) for 2Q17/18 was 1.17 cents, resulting in a distribution yield (annualized) to be 5.99%.

The press release report for Starhill Global Reit’s results can be accessed here.

What I think of Starhill Global Reit’s results announcement for 2Q17/18

The results were unimpressive for the near term. The other Reits that I am holding like CapitaLand Mall Trust and Suntec Reit were able to report at least positive growth of gross revenue and NPI for the most recent quarter. Starhill Global Reit has been reporting a decrease of its gross revenue and NPI for several past quarters probably due to challenging market conditions. While there are some positives like the “asset redevelopment works at Plaza Arcade and Lot 10” to be completed “in the first quarter of 2018” and UNIQLO “to open its first Perth flagship store in Plaza Arcade in mid-2018”, what I feel is that the benefits of these events will only start to trickle down to unitholders’ DPU by mid-2018. In other words, only buy this counter when you have a long term view of its income prospects.

Price wise, the counter is at a 52-week low; its 52-week high is S$0.790 while its 52-week low is S$0.725. As I have bought this counter when the price is relatively high years ago, I sold off all of my holdings in this stock to cut my loss and preserve my ROI in this investment. I feel that the stock can go lower in price due to poor business fundamentals but whether you view it as a value buy now or languishing Reit is dependent on your view. Just be cautious.



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