Brokers’ take: CGS-CIMB downgrades Starhill Global Reit to ‘hold’ on strong price performance

CGS-CIMB on Monday (Jan 30) downgraded its call on Starhill Global Real Estate Investment Trust (Starhill Global Reit) to “hold” from “add” as it believes the Reit’s recent strong unit price performance will cap its upside going forward. 

The downgrade comes after the Reit’s unit price grew by 16 per cent over the past three months, although CGS-CIMB recommends investors to accumulate the Reit in the event of price weakness.

Its target price on the Reit has nonetheless been raised to S$0.62 from S$0.58 on a better retail and Singapore office outlook, although the brokerage’s estimates remain unchanged. 

CGS-CIMB is also positive on the Reit’s strong performance for H1 FY2022, due to the completion of asset enhancement works at The Starhill, lower rental assistance and higher rental contribution from Singapore offices. 

With higher net property income and lower net finance costs, the Reit’s distribution per unit rose 2.2 per cent to S$0.0182.

In the analysts’ view, this showed that the Reit’s backfilling and asset enhancement initiatives were paying off.

They also like the trust for its robust balance sheet, healthy credit metric, along with its latest divestment initiatives. 

“Potential rerating catalysts include stronger-than-forecast reversions and accretive acquisitions,” said the analysts.

“Downside risks include weaker-than-forecast reversion/leasing and slowdown in consumer spending, which may result in lower gross turnover rents and weaken tenant sentiment, affecting Starhill Global Reit’s ability to command positive reversions.” 

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Units of the Reit were trading at S$0.595 as at 10.54 am on Monday, up S$0.005 or 0.9 per cent.