Starhill Global ( former McQ Prime )

[winston]

Small position to follow their story. Francis does have a good track record.

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From UOB-Kay Hian:-

Starhill Global REIT
4Q08: Upside from Ngee Ann City and investment in Chengdu
DPU increased 10.1% yoy to 1.85 cents with growth driven by retail component of Ngee Ann City and Renhe Spring Departmental Store in Chengdu. SGREIT provides an attractive 2009 distribution yield of 12.5%.
4Q08 Results

Results
Starhill Global reported DPU of 1.85 cents, above our forecast of 1.78 cents.
Revenue contribution from retail space at Ngee Ann City grew 21.5% yoy to S$10.3m due to rent review for the master lease for 226,275sf space at Levels B2 to B4 with Toshin Development in Jun 08, resulting in a 19.75% increase in rent. Revenue contribution from office space at Ngee Ann City and Wisma Atria increased 32.1% yoy to S$6.1m due to positive rental reversion. Revenue contribution from Renhe Spring Departmental Store grew 26% yoy to S$4.6m due to variable rent as percentage of gross turnover.

Stock Impact
Opening of linkway improves shopper traffic at Wisma Atria. Starhill Global will benefit from step-up rents from tenants located at basement levels of Wisma Atria when the linkway to Orchard MRT station is widened and
reopened in Jun 09. The linkway has been closed due to construction of ION Orchard. Management estimated a positive impact of S$0.5m on an annualised basis from step-up rents.

Platform for regional expansion. Sponsor YTL will utilise Starhill Global as a platform for regional expansion and may consolidate its investment in commercial properties under Starhill Global. This could involve acquisitions of assets held under Starhill REIT listed on Bursa Malaysia. Other assets to be injected include Starhill Gallery, a 250,000sf luxury retail mall in the vicinity of Burj Dubai scheduled for completion in 2Q10. YTL and Starhill Global are also scouting for opportunities to invest in distressed assets.

Minimal refinancing risk. The next major refinancing is the term loan of S$570m due Sep 10. Gearing is 31% while interest cover is a healthy 4.3x.


Major Shareholders (%)
YTL Corporation 26.7
AIA 11.1
Morgan Stanley Entities 12.0
Book NTA per Share (S$) 1.42
Net Debt per Share (S$) 0.70
Results Due
1Q: May 2Q: Aug
3Q: Nov Final: Feb

Earnings Revision
In Japan, F.L.E.G International, under civil rehabilitation, has assigned its interest in Future Revolution (master tenant for seven properties in Japan) to Hexagon Capital Partners, a private equity manager specialising in retail financial services businesses.

We have conservatively assumed that occupancy for the Japan portfolio to drop to 67% starting 2Q09, with other sub-tenants in Japan expected to maintain existing leases. The Japan portfolio contributed 7.7% of gross revenue in 4Q08.

Valuation/Recommendation
We raised our target price from S$0.87 to S$0.81 after rolling forward to 2009 forecast. Our target price is based on a two-stage dividend discount model (required rate of return: 9.0%, terminal growth: 2.0%).

[winston]

From DBS:-

Not Shining yet
Starhill Global Reit (Starhill) reported FY08 results in line with expectations. Unitholders will receive DPU of 7.17 cts , translating to a 14% yield. Looking ahead, while we view that the trust should be able to deliver relatively stable DPU, headwinds from weaker consumer discretionary and tourism spending could limit re-rating opportunities in the near term. As such, maintain HOLD, TP$0.60

Results in line. Starhill Global Reit (Starhill)’s FY08 distributional income of S$69.4m, DPU of 7.17 Scts
were in line with expectations. Gross revenues and gross profits increased 24% and 25% to S$127.0m and
S$95.9m respectively, driven by
(i) higher rentals achieved through FY08,
(ii) 19.75% Toshin kicker from Jun’08.

NAV of S$1.44. The trust recorded a revaluation loss of S$160.9m on its properties, resulting in a NAV of S$1.44, compared with S$1.61 a year ago. Gearing inches up slightly to 31%, which remains relatively low
amongst the SREIT space.

FY09-10 DPU yield of c.14%. Moving ahead, we estimate DPU yields to remain relatively stable, as the
reit enjoys the full year contribution from the positive Toshin rent review which offsets our estimated 5% drop
in portfolio occupancies and a 20%-10% fall in asking rents its office space and retail space respectively.

HOLD, TP S$0.60. Re-rating catalyst appears lacking in the near term, due to anticipated worsening newsflow of a further tightening of consumer and tourist spending. Our DCF-based TP is adjusted slightly upwards to S$0.60 as we roll forward our numbers.

[ucypmas]

MS have sold down their stake further from 11.99% to 10.977%, on 30/01/09.

Vested.

[winston]

Small position to follow story. From Macquarie:-

Prime rental pressure, but no refinancing this year

Event
Post the change in shareholding of Starhill Global REIT (SGREIT) and its management early this year, we revise our estimates in light of the weaker economic outlook in 2009. Our DCF valuation and target price is now S$0.58 (from S$1.56 pre the strategic review) and we maintain our Outperform recommendation.

Impact
Given the significant increase in new Orchard Road supply of 1.2m sq ft within this year (660k sq ft from ION Orchard, 250k sq ft from Orchard Central, and 294k sq ft from 313 sq ft at Orchard), we expect prime retail rents to fall ~10−13% this year. We have assumed that SGREIT’s retail occupancy falls to 88−90% from 96−99% by 2010.

As the bulk of the revenue from Ngee Ann City is secured under the Toshin master lease, the focus will be on maintaining performance of Wisma Atria basement retailers. The potential uplift in basement traffic once ION
Orchard opens by June 2009 could boost sales and may provide some support for renewal rents.

Gearing is one of the lowest in the sector at 31% and the company has healthy interest cover of 4.3x. The majority of borrowings of S$671m is to be refinanced only in September 2010. As its S$380m CMBS was collateralised against its Orchard Road assets, which were valued at S$1.8bn as of December 2008, we see little refinancing risk given the low 20% LTV. Management is looking to refinance this at the end of 2009/early 2010.

The 2009 budget provided for 40% commercial property tax rebates, which SGREIT will pass through to tenants, though possibly not across the board. The group is considering rebating loyal tenants but details are still being deliberated at the board level.

Earnings revision
FY09−11 DPU estimates were lowered by 22−30% on lower retail rents and occupancy, as well as higher interest rates upon refinancing.

Price catalyst
12-month price target: S$0.58 based on a DCF methodology.

Catalyst: Potential uplift in basement traffic once ION Orchard opens in June 2009. Better than expected renewal rents.

Action and recommendation
Maintain Outperform. The stock has no refinancing requirements this year, is trading at a 70% discount to NAV/unit of S$1.44 and offers an attractive 14.6% FY09 yield. In the retail space, our preference is for CapitaMall Trust (CT SP, S$1.07, OP, TP: S$1.45) as we believe suburban retail rents will be more resilient than prime in a downturn.

[ucypmas]

Missed out on a couple of announcements from major shareholder MS paring down their stake further.

Latest filing on 21st April shows their stake now down to 7.754% from about 11% previously. A series of sales have taken place since around end-Mar. Not far more to go now for them to further pare it down to less than 5% and they will not need to report anymore.

Vested.

[winston]

Vested.

Dont understand why MS is paring down their stakes. With YTL in the picture, their outlook is so much better. In addition, it's trading at a deep discount to RNAV.

Does MS know something that we dont ? Also, whenever there' a surge in price, MS would sell into it

[greenhoney]

perhaps they sense the commercial properties is the next shoe to fall?

[winston]

Vested. From DBS:-

Starhill Global REIT also reported results that were in line with our estimates, with 39% of space up for renewal in 2009-2010. It is inexpensive but catalysts appear lacking in near term. Maintain HOLD, TP S$0.60.

[winston]

Vested. From DBS:-

At a glance
• Results were in line with our estimates
• 39% of space up for renewal in 2009-2010
• Inexpensive but catalyst appear lacking in near term
• Maintain HOLD, TP S$0.60

Comment on Results

Stable performance. Starhill Global REIT (SGREIT) reported 1Q09 results in line with our expectations. Gross revenues and NPI grew by 13% and 17% to S$34.3m and S$27.1m respectively.

NPI margins improved to 80% from 76% due to:-
(i) higher revenues post its Toshin rent review in July’08,
(ii) positive rental reversions for certain office space (+110% from preceding rents),
(iii) aided by savings from property rebates enjoyed during the quarter.

Distributable income came in at 7% higher yoy, translating to a DPU of 1.87 Scts. For 1Q09, SGREIT is retaining c.5% of income available for distribution for working capital purposes.

Strong financial metrics. Gearing remained relatively low at 30%, interest cover at 4.9x. while NAV stands at S$1.43. 39% of space up for renewal in FY09-10. Looking ahead, SGREIT has c. 15%(FY09) and 24%(FY10) of its income up for renewal in an increasingly tough operating climate. We estimate asking rents for its office and retail space to decline by 10-50% over the next 2 years. Vacancy levels is also estimated to increase by 5 -10%.

Recommendation
Maintain HOLD, TP maintained at S$0.60. SGREIT currently trades at 0.3x P/BV, below peers average of 0.4x P/BV. Newsflow from
discretionary shopping is expected to continue remain lackluster, capping re-rating opportunities. As such, maintain HOLD, TP $0.60.
Currently, SGREIT offers a FY09-10 yield of 14-15%.

[ucypmas]

More selling by MS - now down to 6.772%.

Btw anyone know what is the layman meaning for "discretionary mandates" when used in financial-speak?

Vested.