Daiwa downgraded Starhill Global REIT to Outperform from Buy, saying other REITs, such as CapitaLand Integrated Commercial Trust and Frasers Centrepoint Trust, offer more compelling Singapore retail recovery plays.
Singapore retail represents around 50 percent of Starhill Global REIT’s portfolio revenue and net property income with around 20 percent from the Wisma Atria property and around 30 percent from the Ngee Ann City asset, Daiwa said in a report Tuesday. Both properties are located on Singapore’s tony Orchard Road shopping belt, which has been hard hit by the pandemic’s impact on tourism.
Most of the income from Ngee Ann City is on a stable master lease accounting for 23 percent of gross portfolio rent as of end-June, Daiwa said.
“We believe the re-opening theme will still be a positive catalyst for the retail/office/integrated segment for the second half of 2021 although it has been delayed after the government imposed stricter social measures from 27 September 2021 for one month,” Daiwa said.
But it added, “We believe a downtown-mall recovery would not move the needle much for Ngee Ann City, but would significantly benefit Wisma Atria retail, where tenant sales in June 2021 were c.50 percent of the pre-Covid-19 levels due to the Phase 2 (Heighted Alert) period and rental reversions are still under pressure.”
Daiwa said it saw more upside opportunities from the large-cap REITs in the retail/office/integrated segment, after the strong year-to-date performance from the smaller names. It cited Starhill Global REIT’s around 27 percent rise year-to-date.
The investment bank kept its distribution per unit (DPU) forecasts for Starhill Global REIT unchanged, but lowered its target price to S$0.69 from S$0.71 previously, citing a higher 10-year bond yield assumption of 1.5 percent from 1.3 percent previously.
Units of Starhill Global REIT were down 0.8 percent at S$0.63 at 11:38 a.m. SGT.