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Starhill Global Reit


Starhill Global REIT

Disclaimer:
I am of course not a financial advisor and anything posted in this blog cannot and should not be taken to constitute financial advice of any sort.

Last traded price as of 7 June 2018: $0.68



SG REIT is trading at a huge 26% discount to Net Asset Value ($0.92).

Its DPU has declined consistently since FY 2015/16 from 5.11, to 4.92 and 4.57 (estimated 7% decline for FY17/18).





Have we reached rock bottom for SG REIT in terms of DPU? Perhaps not, but I have a feeling we are quite close. In terms of office space, recovery appears to be on its way.

SG REIT has completed its enhancement works on Plaza Arcade in Perth and its anchor tenant Uniqlo will move in by mid 2018.

While we cannot predict whether the retail sector will rebound in Singapore, my gut feel is that further downside is unlikely, given the robust performance of the SG economy (up 4.3% y-o-y for Q1 2018).

Because it pays to be a hum ji kia, for safety, we may assume a further 7% decline in FY18/19 DPU to 4.25 cents. At that conservative yield,  the current price of $0.68 still provides a 6.25% yield, which is more than respectable.

In other words, I believe the current price provides an attractive safety buffer for entry, even taking into consideration further downside in DPU.

Conversely, if the office space sector and retail sector were to experience any unexpected rebound in 2018/19, you can be sure SG REIT would no longer be trading at a 26% discount to NAV.  A good strategy may be to sit and wait for recovery, while earning a 6.25% yield on your investment.

I am very tempted to enter. Just a matter of sourcing funds. The proceeds from my property sale can't come soon enough. Hopefully the YTL ship has not sailed by that time.







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