Starhill's Perth acquisition "sensible": Daiwa

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: Daiwa

Price Call: BUY

Target Price: 0.88

Daiwa raises Starhill Global REIT (P40U.SG) target to S$0.88 from S$0.83 after incorporating the acquisition of the Plaza Arcade retail property in Perth, Australia for A$48 million ($61.8 million).

"We believe the acquisition is sensible, and would complement the adjacent David Jones Building, already owned by Starhill." There could be some revenue opportunities medium-term from integrating the two adjacent properties and deploying underutilized upper-floor space, Daiwa says.

The acquisition raises Starhill's Australian presence to 7.6% of total assets from 5.5%. It expects the acquisition to be incrementally DPU accretive at an initial net-property-income yield of 7.8%, it says; it raises its 2013-14 DPU forecasts by 1.5%-1.6%.

It keeps an Outperform call; "Starhill still offers some value, which is rapidly becoming scarce in the S-REIT space," it says, noting the 2013-14 DPU yields of 6.0%-6.5% are above the sector's 5.8%-6.1%, based on the house's forecasts.