SINGAPORE (Oct 31): Market watchers say Starhill Global Real Estate Investment Trust (SGREIT) lacks growth visibility, despite turning in a set of 1Q19/20 results that were in line with consensus expectations.

SGREIT posted distribution per unit (DPU) of 1.13 cents for the 1Q19/20 ended September, some 1.7% lower than DPU of 1.15 cents a year ago.

The decline in distribution comes on the back of a 7.8% drop in gross revenue to $48.0 million in 1Q19/20, as a result of partial income disruption from the planned asset enhancement of Starhill Gallery in Malaysia, as well as the depreciation of the Australian dollar against the Singapore dollar.

See: Starhill Global REIT posts 1.7% drop in 1Q DPU to 1.13 cents

However, SGREIT saw its Singapore assets stabilise during the quarter, as tenant sales at Wisma Atria in Orchard Road jumped 12.7% on the back of a 2.8% increase in shopper traffic.

“We see tight Orchard Road supply supporting its prime Singapore retail rents, even as growth will be tempered by lower tourist shopping spending,” says Maybank Kim Eng Research analyst Chua Su Tye in a Wednesday report.

Maybank is keeping its “hold” call on SGREIT with a higher target price of 75 cents, raised from 70 cents previously.

“With 46% of its gross rent supported by master or anchor leases, we believe yield-hungry investors may find its 6.1% dividend yield undemanding relative to peers at 4.4-4.9%,” Chua says. “Near-term DPU growth drivers are however elusive, with a lack of acquisition catalysts.”

Analysts at OCBC Investment Research point out that while the increase in Wisma Atria’s tenant sales and footfall was “encouraging”, rental reversions were likely to have remained soft.

“We believe [the increase in tenant sales] was driven by the improvement in physical occupancy,” OCBC adds.

However, the brokerage says it sees SGREIT as” a key beneficiary of the government’s plans to revitalise Orchard Road”. Beside Wisma Atria, SGREIT also owns interests in Ngee Ann City, another trophy asset in the heart of the shopping road belt.

“Given this in-line set of results, we maintain our forecasts,” the research team says.

OCBC has a “buy” call on SGREIT with a fair value estimate of 81 cents.

As at 11.52am on Thursday, units in Starhill Global REIT are trading half a cent down at 74 cents.

According to OCBC valuations, the counter is trading at FY20F distribution yield of 6.0% and price-to-book (P/B) of 0.85 times.