Starhill Global REIT: 2Q11 DPU of 1.04 S-cents in line (OCBC)

Starhill Global REIT reported 2Q11 revenue of S$44.2m, up 18.9% YoY. This came in broadly in line with the street's and our estimates and constituted 24% of our FY11 forecast. The incremental revenue was mainly attributed to the contribution from the Malaysian properties acquired Jun 10, and improved performance from Renhe Spring Zongbei and David Jones Building, offset by lower numbers from the Singapore and Japan assets. Distributable income for 2Q11 came in at S$20.2m which was 14.3% higher YoY. This translates to a DPU of 1.04 S-cents, bringing 1H11 DPU to 2.11 S-cents. Based on the last unit price of S$0.655, this represents an annualized yield of 6.49%. Occupancy remained healthy across the Singapore portfolio though we continued to see negative rental reversion for office. Management indicated that the enhancement works at Wisma Atria is slated for completion in 3Q12 as planned, with the double-storey facades fronting Orchard Road already 75% committed. In addition, management sees signs of recovery in Japan with increased tenant enquiries and we believe this could be manifested through stronger numbers in 2H11. Maintain BUY rating with a fair value estimate of S$0.70.