SINGAPORE (Nov 1): The manager of Starhill Global REIT posted a 1Q19 DPU of 1.15 cents, 4.2% lower than 1.20 cents in 1Q18.

During the period, gross revenue dropped by 1.8% to $52.0 million from $53.0 million last year, mainly due to lower contributions from Wisma Atria and the Australia Properties as a whole largely due to the depreciation of AUD against SGD.

Net property income came in at $40.4 million, 2.3% lower than $41.4 million a year ago.

Overall, income available for distribution was 1.9% lower at $26.2 million from $26.7 million in the previous year.

See: Starhill Global REIT records 4.2% drop in 1Q DPU to 1.15 cents

Following this announcement, OCBC Investment Research is maintaining its “buy” call on Starhill Global REIT with a target price of 74 cents.

On a q-o-q basis, the REIT’s DPU increased by 5.5% from 1.09 cents in 4Q18.

In a Wednesday report, analyst Andy Wong Teck Ching says, “We believe momentum is picking up as 4Q18 had flat q-o-q growth while 3Q18’s DPU was down 6.8% sequentially.”

The REIT seems to be gradually recovering following a hit in its portfolio occupancy in 1Q18 with only 83.5% of occupancy. This was a result of its material exposure to the oil and gas sector, which saw its tenants downsizing and consolidating their operations.

Now, physical occupancy is ramping up to 92.9% and committed occupancy at 95.3%, buoyed by the continued rental recovery in Singapore’s office market, coupled with the REIT’s efforts to diversify its tenant mix by bringing in new occupants such as The Great Room, a co-working operator.

On the other hand, Maybank KimEng continues to rate Starhill Global REIT a “hold” with a target price of 65 cents.

Although the REIT’s results were in line with Maybank’s predictions, it still prefers Frasers Centrepoint Trust (FCT) for its suburban-mall footprint and stronger DPU-growth profile.

Revenue from the REIT’s properties in Singapore dropped 1.5% y-o-y, while NPI dropped 3.2% y-o-y. Occupancy at Wisma Atria was down y-o-y to 97.4%, while office occupancy saw an increase to 95.3% following the opening of The Great Room.

The management is optimistic of the office-rental upside on the back of tight supply.

Meanwhile in Australia, revenue dropped 4.7% y-o-y and NPI dropped 2.5% y-o-y, on the back of a weaker AUD. Renovation downtime at Plaza Arcade has ended with the opening of UNIQLO’s first store in Perth on 30 Aug.

In a Wednesday report, analyst Chua Su Tye says, “Near term, we see limited rent upside amid increased supply and a challenging retail backdrop.”

As at 3.45pm, units in Starhill Global REIT are trading at 68 cents or 0.7 times FY19 book, with a DPU yield of 7.2%.