Starhill Global REIT (P40U.SG) is flat at $0.650, with moderate volume of 1.3 million shares traded after announcing 4Q10 net property income of $36.7 million, +37.0% on-year and DPU of 1.04 Singapore cents, +7.2% on-year.

Daiwa says NPI was 5% higher than forecast, while DPU was 3% higher. “The stronger-than-expected NPI came almost solely from the Renhe Spring Zongbei Property in Chengdu, China, which reported NPI of S$3.38 million (+72% on quarter).” 

But house makes “negligible” changes to its DPU forecasts and says it does not believe the Chengdu property's performance is sustainable. It keeps $0.70 target price and an Outperform rating, as Starhill still trades at a hefty discount to its NAV as at 31 December 2010 of $0.85. 

 

“We believe the units deserve to trade higher than the current price, but unless management convinces the market that it can add value to the portfolio, it should never trade at or above NAV, in our opinion.” REIT looks likely to remain within recent $0.64-$0.66 trading range.