Is Starhill Global REIT A Good Buy? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of Starhill Global REIT and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To October 2024

Business Description

Starhill Global REIT is a Retail REIT that was listed in 2005 and owns a total of 9 properties.

What I Like About Starhill Global:

Historically high levels of dividend yield (Average: 6.58%) – largely due to the “unattractiveness” of the REIT.
Master lease tenancy agreements and anchor leases (53.1% of Gross rental) provide the REIT with long-term income stability while profit-sharing arrangements provide the REIT with potential upside.

What I Do Not Like About Starhill Global:

Top-line performances had deteriorated steadily over the years and have yet to recover back to their pre-covid levels
Poor track record in foreign property investments – The NAV of the REIT has constantly deteriorated as a result of the devaluation of their foreign properties.

Updates From Recent Performance (FY 2023/4)

General Comments:

Revenue growth of 1.1% yoy is driven by higher contributions from Singapore properties and Myer Centre Adeline.
DPU decreased by 4.5% yoy as a result of higher finance costs, taxes and one-off leasing commission for master lease renewal.
Property valuations have dipped slightly by 0.2% due to the downward revision of Australian properties.
WALE (By Gross Rent) has improved from 4.3 years to 8.1 years as the REIT renews their master lease agreement at Ngee Ann City Property.

Positive Headwinds:

All asset enhancement works are completed in 2024 which should bolster the performance of the properties moving forward.
Further recovery in tourism and return-to-office trends in Singapore will provide a boost to the shopper traffic and tenant sales of the malls within the central region. Prime rental rates may continue to increase at the back of this.
The majority of the debt that is due for refinancing comes in 2025 and beyond of which interest rates are expected to start trending downwards.

Negative Headwinds:

Headwinds of foreign markets are expected to persist which could drag the overall performances of the REIT. The strength of the SGD is expected to persist which could also result in further FX losses on foreign property operations and valuations.

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