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StarHill Global REIT Investment Analyst Report Manaswin Sridhar
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StarHill
Global REIT
Investment Analyst
Report
Manaswin Sridhar
Table of Contents Executive Summary ............................................................................................................................................................................. 2
Company Analysis.......................................................................................................................................................................... 3
REITs ........................................................................................................................................................................................... 3
Company Overview .................................................................................................................................................................... 3
Financial Performance................................................................................................................................................................ 4
SGREIT Prices 4 Weeks ............................................................................................................................................................... 5
SGREIT Prices 12 Weeks ............................................................................................................................................................. 6
SGREIT Prices 6 Months ............................................................................................................................................................. 8
SGREIT Prices 2 Years ................................................................................................................................................................. 9
SGREIT Prices 6 Years ............................................................................................................................................................... 10
Peer Comparison ............................................................................................................................................................................... 11
Suntec REIT ................................................................................................................................................................................. 11
DuPont analysis ................................................................................................................................................................................ 12
Macroeconomic Analysis .................................................................................................................................................................. 13
Government Regulation ................................................................................................................................................................ 13
Economic outlook ......................................................................................................................................................................... 14
Currency risk ................................................................................................................................................................................ 15
Microeconomic Analysis .................................................................................................................................................................. 15
Operations .................................................................................................................................................................................... 15
Debt .............................................................................................................................................................................................. 16
The bargaining power of suppliers ............................................................................................................................................... 16
CAPM – Capital Asset Pricing Model .............................................................................................................................................. 17
Risk-Free Rate .............................................................................................................................................................................. 17
Return on Market .......................................................................................................................................................................... 17
Market Return Forecast ................................................................................................................................................................ 17
Dividend Discount Model ................................................................................................................................................................. 19
FCFE – Free Cash Flow to Equity ....................................................................................................................................................... 21
Historical FCFE .............................................................................................................................................................................. 21
FCFE Forecast .............................................................................................................................................................................. 22
Price/Earnings Ratio ......................................................................................................................................................................... 23
Price/Earnings Ratio Model Valuation .......................................................................................................................................... 23
Price to Book Value .......................................................................................................................................................................... 25
References ........................................................................................................................................................................................ 31
Appendices........................................................................................................................................................................................ 33
Appendix 1- Calculation of Market Return ................................................................................................................................... 33
Appendix 2 -Dividend Calculation ................................................................................................................................................ 43
Appendix 3 .................................................................................................................................................................................... 43
Executive Summary StarHill Global REIT is Singapore public company which is first listed on 20 September 2005. It owns 13 properties in
Japan, Singapore, China, Malaysia and Japan, which are valued about $2.7 billion. The main Shareholder of this
company is YTL.
The aim of doing this report is to be able to understand how to use past records and forecast financial performance and
growth of companies such as StarHill Global REIT.
Moreover, we looked at some factors that play apart in StarHill Global REIT performance for instance, current economic
issues, government regulations, company operations and its competitors.
One of the main issues that would have affect the profitability of StarHill was the issue that was raised between Toshin
and StarHill about the expiring lease and how that would have affected the riskiness of the stock of StarHill Global.
Therefore the extension of the lease deal with Toshin to 12 years from now has brought the riskiness of the stock down
leading to the upgrade by S&P from BBB to a BBB+.
Keeping these kinds of qualitative and quantitative factors in mind we have factored in these variables into the four
different types of valuation models to estimate out the real value of StarHill Global.
Dividend Discount Model (DDM)
Free Cash Flow to Equity (FCFE)
Price / Earnings Ratio
Price / Book Value Ratio
All the data was taken from StarHill Global REIT financial report from year 2008 to 2013. From the analysis of the data
that we obtained, we came to find out from all the four aforementioned models that the current market price is actually
undervalued. The results from our analysis are as follows;
Model Fair value ($)
Dividend Discount Model 0.84
Free Cash Flow to Equity 1.12
Price/Earnings Model 1.07
Price/Book Value Model 0.89x
We think that the FCFE model is the best indicator of the fair value of the company because it inculcates all the items
such as the depreciation, Capital expenditure, Issue of new debt, and repayment of debt which will allow us to value the
company from the perspective of all the cash that the company will have that they can afford to pay to the shareholders.
From that assumption we believe that it is safe to say that the stock is most likely underpriced. The element of surety is
not there, as no valuation can be perfect as estimates can vary.
From the above table we can clearly see that StarHill Global REIT is undervalued by the market and this leads us to
recommend you to BUY the stock as the stock has a high chance is going up in value in the future.
Section A
Company Analysis
REITs REIT is a security which sells stocks to public and invests directly in real estate such as properties and mortgages. REITs can be a
public and private company. Public REITs must be listed on stock exchange. REITs have exclusive tax consideration; provide high
yields and liquidity from the investment. REITs have to distribute their taxable income at least 90% to the investors. There are three
types of REITs:
1. Equity REIT is investing and owning the properties, therefore the revenue is from the properties’ rents and
they are liable for the value of their properties assets.
2. Mortgage REIT is dealing with ownership and investment in property mortgages. They lend money to owners
of properties as mortgage or buy mortgage-backed securities or existing mortgages, and therefore the interest
earned regarded as the revenue.
3. Hybrid REIT is investing in both properties and mortgages as the combination of their revenue.
Investors can invest in REITs by obtaining their shares directly on public exchanges or by investing in a mutual fund in public
properties.
Company Overview
StarHill Global REIT is an equity real estate investment trust primarily focuses on investing in real estate utilized for
retail and office purposes. It was listed on the Singapore Exchange Securities Trading Limited on 20 September 2005
and is managed by YTL StarHill Global REIT Management Limited which is a wholly-owned subsidiary of YTL
Corporation Berhad. Starting from two main business on Wisma Atria and Ngee ann city, StarHill Global REIT has
been expanding their business line to 13 properties valued S$ 2.7 billion in Singapore, China, Malaysia, Japan, and
Australia. Their main concern is sourcing enticing property assets while making neat growth from portfolio, driving
lively leasing business, and productive asset improvement.
Their business is based on Singapore. Tentatively in Singapore, StarHill has 74.23% of the total share value in Wisma
Atria (total valuation S$902 million as at 31 Dec 2012), 27.23% of the total share value in Ngee Ann City (total valuation
S$ 1,001 million as at 31 Dec 2012). It also spreads their business line into some countries in Malaysia (StarHill Gallery,
Lot 10). It has ownership on StarHill Gallery (total valuation S$275.7 million as at 31 Dec 2012), Lot 10 (total valuation
S$169.0 million as at 31 Dec 2012). In Australia, StarHill has ownership on David Jones Building (total valuation S$
148.5m as at 31 Dec 2012) and Plaza Arcade (total valuation S$61m as at 31 Dec 2012). In China, it has ownership on
Renhe Spring Zongbei (total valuation S$ 82.4 million as at 31 Dec 2012). While in Japan, it has ownership on Roppongi
Terzo (total valuation S$ 34.7 million as at 31 Dec 2012), Nakameguro (total valuation S$ 6.3 million as at 31 Dec
2012), Holon L (total valuation S$ 13.5 million as at 31 Dec 2012), Haraiyuku Secondo (total valuation S$ 4.5 million
as at 31 Dec 2012), Ebisu Fort (total valuation S$ 48.8 million as at 31 Dec 2012), Daikanyama (total valuation S$ 16.6
million as at 31 Dec 2012). Its trust structure is as below:
Financial Performance
2005
(S$’000)
2006
(S$’000)
2007
(S$’000)
2008
(S$’000)
2009
(S$’000)
2010
(S$’000)
2011
(S$’000)
2012
(S$’000)
Gross
Revenue
25,209 89,876 102,959 127,042 134,621 165,667 180,088 186,005
Net Property
Income
(NPI)
19,437 69,252 76,814 95,884 106,949 130,458 143,585 148,447
Net Income
Before Tax
12,680 46,412 49,410 58,972
Net Income
After Tax
64,859 81,296 88,265 96,655
Distributable
Income
14,911 58,894 59,038 69,427 75,482 82,465 90,777 96,188
Distribution
Per Unit
(DPU)
1.58
cents
5.79
cents
6.19
cents
7.17
cents
3.80 3.90 4.12 4.39
Since its listing on 20 September 2005, financial performance of StarHill Global REIT is improving. Table 1.0 provides
the details of it. In 2005, Net Property Income (NPI) was 19,437,000 and had 256.29% increases to 69,252,000 in 2006.
Basically, all variables increased by more than two times from 2005 to 2006, including distributable income (+294.97%)
and distribution per unit (+266%). However, this extraordinary increase was because all the statement was made from
20 September to 31 December 2005 since all the data before its IPO regarded as irrelevant. The gross revenue of StarHill
is increasing over years. However, from 2010, the percentage of gross revenue and Net Property Income increase with
decreasing rate. The increase of net income was mostly because of higher rates of leases and rents in Singapore and
revenue from other countries from its acquisitions. Since Starhill could increase its net income, consequently the
distributable incomes also increase. But, in 2008, Starhill allowed rights issues to its shareholders, therefore the dividend
per unit (DPU) post-rights dropped by 42.16% to 3.58 cents. However, from 2009 onwards, the DPU increases by
average 5%. Refer to table 1; the DPUs prior to 2009 were greater than after 2009. It was probably because they need
to settle the acquisitions in Japan, China, Australia, and Malaysia, so they increase the ratio of retained earnings
(decrease pay-out ratio) to complete their acquisitions.
From figure 1.1 to 1.7 (Portfolio Summary from 2006-2012), we can conclude that mostly the revenue is coming from
Retail sector with more than 80% of revenue annually. Based on country, the revenue is mostly coming from Singapore
(average more than 70%). Since 2007, Starhill began its expansion to China and Japan. As China at that time was
expanding, its revenue from China was greater than Japan. As its business is running well, they decided to expand it to
Australia and Malaysia. Its revenue from Malaysia is the biggest after Singapore, it is probably because of strategic
location, cheap resources and close to Singapore as the centre management of Starhill.
The valuation of Starhill also increases over the years (refer to Figure 1.8 to figure 2.5 and Table 1). Its biggest valuation
increase was in 2007 (+47.43) when Starhill acquired Renhe Spring Zongbei (China) and properties in Japan. However,
their valuation dropped by 4.77% in 2008 and even worse in 2009 (dropped by 5.78%). It was perhaps because of GFC
which started at the end of 2007 and the market started recovering by the end of 2009. It was showed by the increase of
valuation since 2010. The increase in 2010 was also because of increasing consumer confidence and Starhill also
acquired more Malaysian properties and David Jones Building Property. Since then, its property valuation is increasing
even though in a slower rate.
The unit price performance of Starhill in 2005 after its IPO was pretty good (Figure 2.6). Its prices moved above the
benchmark index. In 2006, the index showed upward trend with the price increase of 31.58% at the closing price
compared to initial year’s price. But, the price seemed to be undervalued since it was below the benchmark. In 2007,
the unit price was getting volatile. Its price started by above 200-day MA but ended up below 200-day MA (Figure 2.8).
The average daily trading volume also decreased to 1.1 million units. It was because the emergence of GFC that caused
price drop in market. Consequently, in 2008, there was a sharp decrease of price by more than 50% of the initial price
to $0.520 (figure 2.9). When the market started recovering in 2009, the unit price indicated upward trend and the average
daily trading volume increased to 3.5 million units, but it was still traded at low price (figure 3.0). In 2010, although the
price was getting slightly better, the trading volume decreased to 2.16 millions units indicating bearish market. Since
the market was bearish, the price showed down trend and decrease in daily traded volume in 2011 (figure 3.2).
Fortunately, the daily volume traded in 2012 was slightly improving and the unit price was uptrend showing increase in
consumer confidence at Starhill (figure 3.3).
Having looked at Starhill’s balance sheet from 2006-2012 (figure 3.4 to figure 4.1), the net assets was increasing from
year to year until 2012. While Net Asset Value per unit from 2005-2008 was average above $1.00. However, after 2008,
the NAV per unit decreased below $1.00. It described that the company issued more units than its Net Assets in order
to gain more capital. In 2005, its current ratio was 0.812 (figure 3.4) and still low at 0.503 at 2009 (figure 3.8). The
current ratio was increasing in 2010 (1.955) and 2011 (1.092) indicating Starhill could manage its assets properly against
its liabilities. Yet, in 2012, its current ratio dropped sharply to 0.164 (figure 4.1) as the firms increase its borrowing to
finance its assets in order to rise the return on equity. Although its current ratio is low, but Starhill has low risk as its
gearing ratio from 2005 until 2012 (refer to figure 4.2 to figure 4.9) approximately 30% which is little geared.
Figure 5.0 until figure 5.5 show the comparison between Starhill REIT and other investments.Starhill also set the yield
to above the average S-REIT yield and government securities yield in order to gain investors’ exposure. In 2008, when
the GFC emerged, Starhill deliberately increased its yield to 14.15%, 13.22% above the Bank Fixed Deposit Rate in
order to beat the market downturn. After the market getting stabilized, Starhill readjust its yield to approximately 6%-
7% close to average S-REIT yield, but still far above the fixed interest government securities.
The Blue Line represents the price SGREIT
The Red Line represents the Straits Times Index
The Green Line represents the S&P 500 Index
The Brown Line represents 200-day Moving Average
SGREIT Prices 4 Weeks
During its 4 weeks time, the stocks were traded below the 200-MA and S&P 500 indices. On 15 Aug, the stock was
traded at 0.8150 and the biggest fall around 7% to 0.76 on 29 Aug. Then, its price slightly climbed up to 0.7750 at 13
Sep but still incurring losses at almost 5%. Basically it had the same pattern with Straits Times Index but mostly appeared
below STI. If a $1000 was invested in this stock 4 weeks ago, it would have been valued at $950 at the end of period
exhibitted below and that is a loss of approximately $50 during 4 weeks. On August, the volume traded was increasing
by almost five times was probably because investors wished to benefit from the price decrease to be able to sell it higher
at the end of period. But actually the price kept decreasing and caused a large decrease in volume traded.
(Sg.finance.yahoo.com)
SGREIT Prices 12 Weeks
If we look back at a longer period, we would see that the pattern is approximately the same with 4 weeks time. On 14
Jun the price was closed at 0.8750 but at the end of period, the price was closed at 0.7750 so the loss is around 11.43%.
The market performed well until July indicated by the SGREIT index was above the 200-day MA. This good
performance was also demonstrated by higher trading volume until July. However, since July, the market performed
below the 200-day MA while the volume only reached the peak when price in ‘trough’ position. Yet, its overall index
was still below STI and S&P 500 index. If the invested $1000 12 weeks ago, it would have been at $885.7 at the end of
the period which translates to a loss of $114.3.
SGREIT Prices 6 Months
During 6 months time, the company performed very well from March-June. It was indicated by the market
performance above the 200-day MA, STI index, and S&P 500. However, the market showed the downtrend
although it had reached 8% gain on April. Its trading volume was pretty good until May at its peak at
14,483,000 units. Afterwards, the price went down accompanied by decrease in trading volume. Initially the
price was 0.9050 and ended up at 0.7750, so there was 14.36% decrease in price. This means if the investors
invested $1000 6 months ago, they would get $856.4 at the end of period which implies a loss of $143.6 over
6 months.
(Sg.finance.yahoo.com)
SGREIT Prices 2 Years
The price index during two years showed a good performance with increase in trading volume as well. Although in the
first one year it represented a steady increase, since June 2012, the price and trading volume indicated sharp increase
exceeded STI, S&P 500 and 200-day MA index until the end of the period. The index of SGREIT, STI, S&P 500, and
200-day MA pointed the same pattern throughout 2 years. Its price increased from the initial period at 0.61 to 0.7750 at
the end of period which increased 27.05%. If the investors invested $1000 2 years ago, it would be worth $1270.5 today
that is a gain of $270.5. During this period a dividend of $79.6 would have paid on $1000 that we assume was reinvested
back in the stock for the aim of this calculation.
(Sg.finance.yahoo.com)
SGREIT Prices 6 Years
If we look at four indices below (SGREIT, STI, S&P 500, 200-day MA), their movements were pretty the same. At the
end of November, SGREIT price was closed at 1.13 and increased gradually until April 2008. After GFC emerged, the
price decreased sharply by almost 65% although the trading volume slightly increased. This increase in volume indicated
the rise on consumer confidence which subsequently drove the price to increase. However, this increase could not offset
the depression during GFC. Therefore, at the end of period, there was a loss of 31.42% compared to the initial price. If
the investors invested $1000 6 years ago, it would have been $658.8 today which is a massive loss of $314.2. For the
purpose of calculation, we assume the dividend of $240.3 was reinvested into the stock. (Sg.finance.yahoo.com)
Peer Comparison Starhill Global REIT operates by investing mostly in real estate used for retail and office purposes. Since 2005,
Starhill Global REIT has developed its initial holdings from interest in two benchmark properties on Orchard Road in
Singapore to 13 real estates in Singapore including Wisma Atria and Ngee Ann City, Malaysia, China, Australia, and
Japan, estimated at about S$ 2.7 billion.
Suntec REIT
As this real estate industry is competitive and vigorous, Starhill Global REIT has a big rival in Singapore. Suntec
REIT, which is the first compound REIT in Singapore also the main competitor of Starhill Global REIT. Suntec REIT’s
holdings consist of main trading properties in Suntec City, Park Mall, a one-third interest in One Raffles Quay and one-
third interest in Marina Bay Financial Centre Towers 1 and 2 and the Marina Bay Link Mall. Even though Suntec City
is one of the biggest malls in Singapore, Suntec City loses to Wisma Atria and Ngee Ann City. Much more people go
to Wisma Atria and Ngee Ann City due to its strategic location along the Orchard road that consist of many Shopping
Malls and near the MRT station. In addition Takashimaya, a well-known department store also influences Ngee Ann
City because it is situated inside of Ngee Ann City. Park Mall is also less crowded even though it is located near the
most crowded MRT station. The reason is Park Mall’s location across a strong competitor Plaza Singapura, which
consist of more variation of shops. Besides Suntec City and Park Mall, Vivo City also can be counted as Wisma and
Ngee Ann competitor. As Vivo City is located at circle line that provides flow of transportation, people who live around
Vivo City area are less likely to go to Wisma and Ngee Ann. In addition, people who come to Singapore by water
transportation are also more likely to go to Vivo City, as it is located near the harbor.
DuPont analysis The three-step DuPont analysis mainly tries to capture the management’s effectiveness at generating profits which
refers to the net profit margin, managing assets which refers to the asset turnover and finding an optimal amount of
leverage which is denoted by the equity multiplier. The objective of this analysis is to see if the company is able to
utilize its resources more efficiently and increase its return on equity over a time period. The following DuPont analysis
will analyze both StarHill Global as well as its closest competitor Suntec REIT. These two companies are very much
similar as they operate in a similar fashion, their rental spaces include both commercial as well as office spaces.
The following are the required applications*;
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 = 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 =𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝐸𝑞𝑢𝑖𝑡𝑦 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
𝑅𝑒𝑡𝑢𝑟𝑛 𝑂𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 = (𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛) ∗ (𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟) ∗ (𝐸𝑞𝑢𝑖𝑡𝑦 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟)
Particular
s
Compan
y
2008 2009 2010 2011 2012
Net Profit
Margin
StarHill
Global
REIT
-1.08 -0.34 0.905 0.579 0.707
Suntec
REIT -0.298 -0.469 1.546 2.347 1.624
Asset
Turnover
StarHill
Global
REIT
0.0587 0.0582 0.059 0.0634 0.0659
Suntec
REIT 0.054 0.0489 0.0375 0.0359 0.0337
Equity
Multiplier
StarHill
Global
REIT
1.56 1.457 1.68 1.69 1.65
Suntec
REIT 1.571 1.553 1.669 1.695 1.664
ROE StarHill
Global
REIT
(9.9%) (2.9%) 9.0% 6.3% 7.6%
Suntec
REIT (2.5%) (3.6%) 9.7% 14.3% 9.1%
Net Profit Margin – StarHill’s profit margin took huge blows in the years 2008 and 2009 making losses that amounted
to almost 137 million SGD and 46 million SGD respectively. This was mainly caused by the negative revaluation of
their assets which hit their profit hard. As a result the company’s ROE also had to deal with problems which also led to
many investors pulling back their funds to save whatever is left of their investment which caused a deep plunge in the
stock price of StarHill Global from $1 down to 30-40 cents a share. On the other hand StarHill’s closest competitor
Suntec REIT also made losses in the year 2008 and 2009 but they were soon able to double their earning and make net
profit margins of 200% and above with property values appreciating. From the year 2009-2012 StarHill has been able
to keep their net profit margin in the area between 60%-90%. Another factor in the development of the Net profit margins
was that the Singapore government had given tax rebates and also the lower sales volume in the Singapore market meant
that lesser taxes needed to be paid. In 2009 more costs had to be incurred the reason mainly being the fact that the link
from wisma Atria to the orchard mrt had to be closed and tenancy reliefs had to be paid which brought the costs up.
There were also costs incurred in strategic review and high professional fees. In 2010 tax rebates expired and caused
tax payments to increase but at the same time the property revaluation had some positive aspects as they made a gain of
$76.4 million. Thereafter StarHill has been trying to lower costs and improve their profit margin. Their properties have
lately been appreciating in value.
Asset Turnover – The asset turnover represents how effective the company is utilizing the assets to make a return.
StarHill Global has shown a constant increase in their asset turnover ratio. The asset turnover has slowly moved up from
5.8% in 2008 to about 6.5% in 2012. On the other hand Suntec REIT, although having produced huge profit margins
are not able to match the asset turnover of StarHill as Suntec’s Asset turnover has ranged from 5.4% declining to about
3.7% from 2008 to 2012 respectively. StarHill has a better mix of capital tied up in their assets as they are able to make
a higher return and an increasing return on those assets. On the other hand we have Suntec who have excessive assets
which are growing year on year but is not able to generate a proportionately higher income to each dollar of asset.
Equity Multiplier – The equity multiplier shows the proportion of total assets financed with debt. For StarHill Global,
their Equity multiplier stands in the region of 1.5 to 1.6 which means for every 1.5-1.6 dollars of asset there is 1 dollar
of equity which means about 60c for each dollar of asset is financed by debt. On the other hand Suntec REIT has about
the same figures that is about 1.5 – 1.6. But since the size of Suntec REITs assets is bigger in dollar value, they will be
carrying a bigger burden of debts which causes a little uncertainty in the eyes of investors.
Macroeconomic Analysis StarHill Global REIT is a company that based in Singapore, which operates in office and retail rental service that spread
in several countries around Asia such as Japan, Singapore, Malaysia and Australia. The REITs traded on the SGX mostly
invest in property assets such as industrial and office, residential, retail, healthcare, hotels and lodgings. With REITs,
investor enables to own a share of a diversified portfolio without owning the property. For the purpose of the analysis,
we will discuss the macroeconomic structures in Singapore. The key factors influencing the macroeconomic structures
are:
Government Regulation
In the few previous years, the REIT in Singapore is considered as the good investment. The house rental rate
has rising because of the high increase in Singapore property prices (Bloomberg, 2013). One of the reasons of
increased in Singapore property price is the low bank interest rate. Due to the low interest rate, consumers are
driven to invest their money in property for a better return compares to holding cash. However, the increase of
Singapore property price has gone uncontrollably that forced the government to intervene in the property
market. In recent times, government has introduced several cooling measures to reduce the demand of Singapore
properties. The latest policy of cooling measures is regulates the borrowers monthly mortgage payments cannot
exceed 60 percent of their income. This policy also protects the borrowers for unpredictable rising interest rates.
The unpredictable rising interest rate maybe occurs in the near future as the US Federal Reserve is planning to
reduce the money stimulus. As Singapore interest rate depends on SIBOR (Singapore Interbank Offered Rates),
while SIBOR indicate their interest rates based on United States Federal Reserve Funds rate, it can be conclude
that Singapore interest rate is proportional to US interest rate. Therefore, when the US interest rate increases,
Singapore interest rate will inevitably increase their interest rate too.
However, according to Moody credit rating agency, the expected increase interest rate for the upcoming 12 months will
not impact heavily on the REITs in Singapore, as out of 13 REITs in Singapore, more than half of them are bound with
fixed-interest rate and need for refinance is low(MAS, 2013) .
The cooling measures policy indeed has caused the investors to shift their demand to the retail and office sectors. In
2014 office rents in Singapore are expected to increase according to Lynette Leong (chief executive office of the
manager for Capita Commercial Trust). Lynette Leong pointed some strong bases that cause the increase in the office
rents in Singapore. Many companies are keen to develop their business or set up their headquarters in Singapore.
However, the increase in the demand for the office spaces does not match with the supply anymore as the supply in
office space has hit to the lowest level in two decades. One of the reason for the company to set up headquarters in
Singapore because the city office rents have dropped 16 percent last year which make the Singapore become cheaper
than Hong Kong, Shanghai , Tokyo, Mumbai and Sydney. The limited place supply itself is a rational caused of the
scarcity of land (Singapore is smaller than New York City). Moreover, according to brokerage Collier International, the
positive trend of the office sectors have been showed in the past three months where the office rents in business district
has increased or showing a signed of recovery which was the first gain since fourth quarter of 2011.
Economic outlook
GDP (Growth Domestic Product) measures the total value of product and service produced by a country in certain
period of time.
From the graph above, it illustrated that the GDP growth in Singapore, showing a positive trend upward from
93.206 in 2004 to 245.024 in 2012 in terms of billions of U.S. dollars(CNBC, 2013). The positive growth in GDP is due
to the decrease in the unemployment rate. Decrease in the unemployment rate is due to the increase in growing sectors
of shopping centers, properties and tourism. For example, in 2011, tourism sectors reached the visitors of 13.2 million.
As the number of visitors increased, the receipt bill from these visitors also hit the new high of 22.2 billion. Giving the
high number of visitors, tourism sectors such as accommodation, entertainment, restaurant and others are experiencing
growth and expansion. In order to maintain the tourism business, Singapore keeps on building attraction places or
interesting spots or events. One of these attraction are established in 2013 is Singapore Aquarium at Sentosa. Beside
attraction, Singapore also hosts popular events such as Formula 1.Example of the expansion in tourism sector also opens
a lot of job opportunity for Singaporean is Marina Bay Sands; MBS employs more than 9400 full time employees. In
2015, a new national art gallery and a new Pinacotheque museum in collaboration with the French museum will also be
established. In a nutshell, the Singapore GDP heavily depends on the service sectors. In 2014, the GDP is being estimated
to expand by 4%. Increase in GDP, will has a positive impact on the REIT especially in the retail sectors. As jobs
opportunity growing in the market, the Singaporean is earning more income. For this reason, Singapore will spend more,
as their income is higher. The higher spending by the Singaporean will increase the opportunity for the retail sectors to
growth.
Currency risk
Indonesia, Malaysia, China, India and Australia are the top five countries that contribute to Singapore’s tourism industry.
However, the increase in Singapore dollar in these few months towards these countries caused these countries
contribution to Singapore’s tourism industry become lower. As the tourist will need to pay high prices to purchase the
good in Singapore, therefore, it is not profitable for them to purchase goods in Singapore. For example, tourist from
Indonesia, as can be seen in the graph below. The Indonesian Rupiah fell to the lowest point from 2009 of one Singapore
dollar equal 6715.9977 rupiah to become 9066.94 rupiah in 2013(Bloomberg,2013).
According to our prediction, in the future, the Singapore dollar will remain strong, as Singapore will use the strong
currency to control the inflation. Therefore, we expect that REITs in the future will not going to do better as GDP will
not expand by 4% but it will still remain at the point at 2013 or even decreased by a small margin. Besides that, another
reason of the REITs not doing better is because of the currency risk and the possibility of increase in interest rates will
make either consumer or investor to rethink to invest or to purchase the good in the Singapore.
Microeconomic Analysis Starhill Global REIT owned property in Japan, Singapore, Malaysia, China and Australia. At 30 June 2013 Starhill
global REIT owned 74.23% of the total share value in Wisma Atria and 27.23% of the total share in Ngee Ann City
which these properties are in Singapore. In Malaysia, In China, in Perth as well as in Japan starhill owned 100% interest
of shares.(Financial Report)
Operations
In Singapore, either Wisma Atria or Ngee Ann City are located on orchard road which these malls attracted shoppers
from domestic or non-domestic and causing shopper traffic of 27 million. After asset redevelopment of wisma atria in
2012, it yielded return on investment for roughly 12.8% and exceed the target of initial target of NPI, which is 8.0%.
Also according to office properties in the portfolio the overall occupancy of the office increased to the highest over the
last five years for 98.3%. The strong performance can be seen also by demand for property on orchard road such as
fashion, retail, medical centre and so forth.
Furthermore in Japan, due to depreciation of Yen towards SGD in 2012, this causes Japan portfolio to have a smaller
earnings which is decreased to approximately 8% to 12%. However, SGREIT use currency hedge strategy, which
maximizes the utility of local currency, designated borrowings to correspond the currency of the asset investment
whenever possible. As a result, Japan portfolio portrays a little part of SGREIT’s asset, which is 4% of revenue in 2012.
Resulting, net property income for starhill is $148.4 million compared with in 2011 is $143.6 million which this figure
showed increased in their net property income for the fourth quarter.
In 2013 singapore portfolio showed some positive figures such as Ngee Ann City Retail master Toshin extended the
rent review up 6.7% which is higher than the prevailing rate for the renewal period of 12 years. However, standard and
poor give a rating of new ordinary units from BBB to BBB+ and their gearing ratio is 30.3%. the reason is because there
is a refinement in capital structure and good cash flow coverage because of the existence of strong sponsor which is
YTL group. Moreover, YTL groups increase its holding of convertible preferred units into ordinary units from 29.4%
to 36.3% (Singapore Business Review, 2013)
For the second quarter of 2013 compare with second quarter of 2012 net property income is increased from 37.1 million
to 39.1 million. This increment was due to strong contribution from both singapore assets and Plaza Arcade in Australia.
Debt
Starhill Global REIT has total borrowing of S$855,370 in 2013 compared to in 2012 is S$849,383 this shows increasing
in total debt. The debt is divided into secured borrowing and unsecured borrowing which the total of the secured
borrowing is S$648,740 and total of the unsecured debt is S$209,377.
Total debt that incurred in 2013 is $855 million with average interest rate 3.03% rate p.a. Some of these debts were to
covered $508 million debts which are maturing in 2013. Also, some of the debts that are mature in September 2013 will
be post refinanced and will be extended for approximately 3.5 years.
The bargaining power of suppliers
There is only approximately 12% of available area on orchard road between 2013 and 2016. They are The Heeren,
orchard gateway and the redevelopment of 268 orchard road. The occupancy rate remains strong at 93.7%. This implies
that there is lesser area that can be occupied on orchard road and StarHill global REIT are the one of suppliers. Moreover,
demand for leasing on area of orchard roads increased because more tourists are coming as well as domestic spending.
Also, because of the existence of tourist arrival this will lead to increase on price for orchard rentals. Furthermore,
Because of the tightening supply of available area while the demand is still steady, therefore the bargaining power of
supplier increased.(Fisheyer, 2013)
In the future, we can predict, SGREIT will still be doing well as either Toshin or YTL believe StarHill have a promising
future because StarHill has been investing in asset as a result StarHill will spend less on investing asset and gain more
profit.
SECTION B
CAPM – Capital Asset Pricing Model The CAPM is the measure of what the investor will require as a return for providing their financial capital, and bearing
risk.
Risk-Free Rate
In order to calculate the required rate of return that an investor would expect from an investment in StarHill Global’s
stock we need to first calculate the 𝑹𝒇 the risk free rate which is assumed to be the same as the yield on a 10 year
Singaporean government bond which is assumed to be 2.6%.(MAS, 2013)
Return on Market
The market return is calculated based on the market proxy that we are using for the purpose of the valuation of the
StarHill Global REIT. The market proxy that we chose to use is the Straits Times Index of the Singapore stock exchange.
Based on a CAGR, we come to find that the historical 𝑹𝒎 was 5.22% Appendix 1 percent based on data from the past
5 years. Calculation can be seen at appendix 2. But however we do not expect that this historical rate will prevail in the
future as we see the next 3-4 coming years to be a period of growth rather than any recession. Although the Syrian war
may create some small disturbances to the STI index we do not expect any drastic change in the return from the market
portfolio. Thus we formulated a way to forecast the probable market growth rate using probabilities of the occurrence
of a recession, a boom, or a constant period.
Market Return Forecast
The rationale behind these probabilities is that given a 10 year period of the STI from 2003 to 2013 we calculated a
bearish probability of 20% as historically we had 2 periods of slumps out of 10. The Bullish period show the periods of
high growth and 3 out of 10 years were belonging to that and finally a constant growth period of 50%.
Scenario Probability Returns Expected
Return
Bearish 0.2 -5% -0.01
Constant 0.5 7% 0.035
Bullish 0.3 11% 0.033
Return On
Market
5.8%
Therefore from our above stated calculation we have come to decide that we will fix the future market return from
STI as 5.8%.
The CAPM redefines risk in terms of a security’s beta, which captures the non-diversifiable portion of that stock’s risk
relative to the market as a whole. Because of this, beta can be thought of as indexing the assets systematic risk to that
of the market portfolio.
We took data from January of 2008 until july of 2013 as we thought that more data points would suggest a better
estimation of the risk of StarHill’s stock. The probability of a financial crisis will always exist and therefore we cannot
chose to ignore the returns during the recession. Added on the fact the recently StarHill’s stock was upgraded to BBB+
by S&P we believe that our beta is the closest indicator of the stock’s current risk.
As seen from the graph above that plots all the returns of the STI index with that of the returns from StarHill Global’s
stock we can see that the Beta(𝛽𝑖)will be 0.86505.
Adjusted Beta Meryl Lynch method(Bloomberg, 2013) = 0.91004
This Beta can be justified with S&P’s upgrade of the StarHill Stock to BBB+ from BBB. (Bloomberg, 2013)
Now to calculate the required rate of return we need to apply the numbers that we have calculated till now and apply
them on the formula of the capital asset pricing model;
𝐸(𝑅𝑖) = 𝑅𝐹𝑅 + 𝛽𝑖[𝐸(𝑅𝑚) − 𝑅𝐹𝑅]
𝑇ℎ𝑒𝑟𝑒𝑓𝑜𝑟𝑒 → 𝐸(𝑅𝑖) = 0.026 + 0.91004(0.058 − 0.026)
𝐸(𝑅𝑖) = 5.5%
Therefore we have an expected required rate of return of 5.5% which we will be using the coming valuation methods
that we will be using to value the stocks of StarHill Global REIT.
2%
y = 0.865058 x + 0.0005R² = 0.2612
-20%
-10%
0%
10%
20%
30%
40%
-20% -10% 0% 10% 20%
Beta
Linear (Beta)
Dividend Discount Model This model assumes that that the value of the share in a company is the present value of all future dividends which can
be denoted by the formula shown below;
∑𝐷𝑡
(1 + 𝐾)𝑡
𝑛
𝑡=1
Where D is the dividends paid out during the given year t and k being the required rate of return on the given stock. In
order to value the stock of StarHill Global we first need to forecast their growth rate which requires a forecast of their
ROE and Retention rate. As the formula is given by;
𝑔 = 𝑅𝑅𝑥𝑅𝑂𝐸
Where g is the growth rate, RR is the retention rate and ROE is the return on equity which can be broken down into
three parts as done before in the DuPont analysis; which is net profit margin, asset turnover and equity multiplier.
Therefore we need to forecast these ratios in order to arrive at a growth rate.
By looking at the graphs above we can estimate an average return on equity the company makes as well as the average
retention rate of profits. As seen from the above StarHill Global has been facing a slightly increasing trend in the return
on equity which is mainly attributed by the increases in the Asset turnover and equity multiplier. As the profits are
slightly decreasing the trend that we see in the retention rate is that is decreasing. Most probably to keep investors happy
they are required to distribute more profits to the shareholder. From the above data we can arrive at an average of the
ROE and RR (retention rate). Using arithmetic average we arrive at an ROE of 7.6% and a RR of 1.9%. And according
to the formula we should be having a dividend growth rate close to 0.14%. The below graph illustrates the trend of
dividend pay outs made by StarHill global over the years, as we can see for the coming 2-3 years we can expect an
increasing trend before it starts to fall back to the long term sustainable growth rate.
-9.90%
-2.90%
9%6.30%
7.60%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
2008 2009 2010 2011 2012
Return on Equity
Return on Equity
Linear (Return onEquity)
0
2.6
2.12
1.471.72
0
0.5
1
1.5
2
2.5
3
2008 2009 2010 2011 2012
Retention Rate
Retention Rate
Linear (Retention Rate)
According to our analysis the forecasted rise in the influx of foreigners and tourists into Singapore will make the
StarHill’s Retail properties more attractive and thus could sign a growth period in the revenues also given the fact that
most REITs in Singapore are shielded from interest rate fluctuations due to the fact that they usually take out debt
obligations based on fixed interest lowers their risk exposure to the fluctuation interest rates in this given period of
quantitative easing. We expect the dividends to grow at 2% for the coming 2 years and after that we expect the growth
of dividends to slow down by 0.5% annually until it reaches 0.14% where it will continue that way to perpetuity.
Therefore according to the dividend discount model the value of a share in the stock on StarHill Global will be;
Year Expected
Dividend
Growth
Rate
Required
Rate of
Return
Present
value of
dividends
2013 0.0436
5.5%
0.651546277
2014 0.0444 2% 0.04189285
2015 0.0453 2% 0.040329088
2016 0.0460 1.50% 0.03863436
2017 0.0465 1% 0.036790949
2018 0.0467 0.50% 0.034874057 0.872217238
2019 0.0468 0.14%
Fair value $0.84
As of September 18 2013 the share value of Star Hill Global was priced by the market at 0.79₡, which according to
our valuation, is underpriced by the market. As a result we think that it would be a good idea to buy the stock
now as there is possible upside of 6.3%.
The reasons for the estimate is that we believe that in the near future there could be a start to long term secular,
not cyclical, trend of rising interest rates. Also a possibility of having higher discount rates and liquidity
factors, due to capital re-allocation across asset classes, would likely negatively impact REIT prices over the
mid to long term. Second, we believe a short lived fundamental growth outlook for the sector is unlikely to
trump the negative impact of rising rates. While the dividends per share are expected to grow 2% in 2014, this
is to a large extent due to positive reversions off expiring leases signed near the financial crisis troughs. We
also see a limited ability for capital growth as the increasing interest rates may affect that.
But we can never be sure of how accurate our prediction of the company’s growth rate or required rate of
return may be given that the financial markets are very dynamic and changes can take place when it least
expected and therefore we conduct a sensitivity analysis to show the deviation of our current valuation price
given the different range of growth (g) and required rate of return (r).
y = 4E-09x2 - 0.0003x + 6.9083
0
0.005
0.01
0.015
0.02
2/1
/20
08
8/1
/20
08
2/1
/20
09
8/1
/20
09
2/1
/20
10
8/1
/20
10
2/1
/20
11
8/1
/20
11
2/1
/20
12
8/1
/20
12
2/1
/20
13
Dividends
Dividends
Poly. (Dividends)
Required Rate of Return (Re)
0.036 0.046 0.056
Growth (g)
0.0014 1.117 0.915 0.754 0.005 1.282 0.978 0.793 0.01 1.487 1.085 0.857
0.015 1.791 1.226 0.937 0.02 2.285 1.423 1.039
FCFE – Free Cash Flow to Equity Free Cash Flow to Equity (FCFE) is a measure of how much cash that a firm can afford to pay the Shareholders after
cutting down expenses, reinvestment and debt repayment. FCFE is often used to measure the value of the company. By
subtracting any capital expenditure from the net income, since capital expenditures are regarded as cash outflows. In
contrary, amortization and depreciation are added back due to the fact that they are non-cash expenses. The difference
between capital expenditures and depreciation is called the net capital expenditures and usually regarded as the function
of the company’s growth characteristics.
If a firm has high net capital expenditures compare to earnings, the firm is a high-growth company. On the other hand,
a low-growth company has low and sometimes negative net capital expenditures. Next, an increase in working capital
will reduce the firm’s available cash flow to pay the shareholders. A fast growing company usually will have high
working capital requirement and as a result will have a large increase in working capital.
Moreover, shareholders also have to consider the impact of changes in the level of debt on the cash flows. Debt
repayment represents a cash outflow but can be fully or partially financed by the issue of new debt, which is a cash
inflow. By netting the repayment of existing debt against the new debt issues offers a measure of the cash flow effect of
changes in debt. Furthermore, Net Income –Net Capital Expenditure –Change in Net Working Capital – New Debt -
Debt Repayment defines the remaining cash flow for the FCFE.
The table below shows the free cash flow that is generated by StarHill over the past years of 2008 to 2012. As we can
see the net income is negative in the first two years this is largely from the effects of the global financial crisis where
tenants pay rate were deferred due to lack of sales and inability to pay this resulted in a negative free cash flow in the
2008. But soon after that the FCFE in 2009 became positive and has been growing. A decrease was however experienced
in 2012 which was contributed to mainly because of a fall in income which was due to an increase in finance expense
and increments in the property taxes.
Historical FCFE
Year End
December 2008A($,000) 2009A($,000) 2010A($,000) 2011A($,000) 2012A($,000)
Net Income -137,278 -46,231 150,027 104,407 131,667
-Net CAPEX 1,977 536 605 16,165 20,650
+Depreciation 1,606 220 326 339 460
-Changes in
net working
capital
180,542 -266,320 355,366 48215 -460,022
+New debt 289,286 56,199 793,495 167,593 123,442
-Debt
repayment 289,416 103,435 572,124 167,081 124,595
FCFE -318,321 172,537 15,753 40,878 570,346
No. of Shares 960,680,104 1,935,334,984 1,943,023,078 1,943,023,078 1,943,023,078
FCFE per share -0.33 0.089 0.0081 0.021 0.29
Growth Rate 127% -91% 160% 1295%
The Table below show is the forecast FCFE that we think that StarHill Global will face in the coming two years 2014
and 2015. In the next 12 months we think that there might be a decrease in revenue and in line with OCBC forecasts.
FCFE Forecast
we have come up with the forecast for the two years until 2015. We believe that the free cash flow to equity will be on
the rise in the coming years as the recent signing of the deal with Toshin will sure up some more revenue. Also the fact
that and increasing levels of working capital being freed up.
After the calculations of the FCFE per share we can now calculate the present value of these values in order to obtain
the value of the company. We forecast that the FCFE per share will grow at about 0.1% year on year this derivation
comes from the growth rate that company will face in the long term which was calculated earlier using the ROE and the
Retention Rate. The fair value of the share from the FCFE model is $1.12 per share which is above the market value of
Year End
December 2011A(000’ $) 2012A(000’$) 2013F(000’$) 2104F(000’ $) 2015F(000’ $)
Net Income 104,407 131,667
157,100 103,600 176,900
-Net CAPEX 16,165 20,650
22,500 -39,000 13,600
+Depreciation 339 460
400 400 400
-Changes in net
working capital 48215 -460,022 -1,300 -500 3,000
+New debt 167,593 123,442
0 21,700 0
-Debt repayment 167,081 124,595 82,100 39,623 20,000
FCFE 40,878 570,346
54,191 125,577 140,700
No. of Shares 1,943,023,078 1,943,023,078
2,181,204,436 2,181,204,436 2,181,204,436
FCFE per share 0.021 0.29
0.025 0.058 0.064
Year End 2013 2014 2015 2016
FCFE 0.025 0.058 0.064 0.066
Growth 0.1
Annuity 1.11
Time Frame 0 1 2 3
Present Value
Factor
- 0.9157 0.9157
Present Value of
FCFE
0.53 0.058
Present value of
annuity
1.01
Fair Value $1.12
$0.79 therefore we can say that the shares of StarHill Global is undervalued and therefore leads us to recommend you
to buy the shares as the value may go up in the near future.
Price/Earnings Ratio Price/Earnings Ratio (P/E ratio)
P/E ratio or known as Earnings Multiplier model is showing how much investor are willing to pay per dollar for every
expected 12 months earnings in shares. The Earning Multiplier model is shown as follows:
𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 12 − 𝑀𝑜𝑛𝑡ℎ𝑠 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠
Comparing current market price and expected 12-months earnings allowed us to determine the market valuation of
StarHill Global REIT associated with the actual current wealth of the company. Therefore, this ratio can be used by
investor to look up the attractiveness of the REITs between its similar competitors.
In Dividend discount model (DDM), the P/E ratio is being formulated as follows:
𝑃0 = 𝐷0
(1 + 𝑔)
𝑅𝑒 − 𝑔
𝑃0 =𝐷1
𝑅𝑒 − 𝑔
If both sides divided by EPS0 (Earning per share), the formula become:
𝑃0
𝐸𝑃𝑆0=
𝐷0𝐸𝑃𝑆0
× (1 + 𝑔)
𝑅𝑒 − 𝑔
We can use the above formula to calculate our P/E ratio.
In order to calculate the P/E ratio, we should take note of expected payout ratio (D0/EPS0), the expected growth rate for
the REIT (g) and the estimated rate of return on REIT (re).
Price/Earnings Ratio Model Valuation Net profit in 2012= $96,188 ,000
We assume that net profit to increase by 10% from 2012 to 2013 due to microeconomic factor reasons (Toshin lease).
From 2013 to 2014, net profit decreased by 7% because of macroeconomic factor reasons (Singapore currency inflate).
After 2014, government control the currency for not inflate to high, the net profit is constantly increase by 9% from 2015 to
2017.
Weighted Average of Unit assumed to be constant at 1,592,516,556
Earnings per share 2012= Net profit 2012/ Weighted Average of Unit= $0.0604
Earnings per share 2013= Net profit 2012* 1.1/ Weighted Average of Unit=$105,806,800/ 1,592,516,556=0.066
Earnings per share 2014= Net profit 2013- (Net profit 2013*0.07)/ Weighted Average of Unit=$98,400,324/1,592,516,556=
0.06
Earnings per share 2015= Net profit 2014*1.09/ Weighted Average of Unit=$0.067
Earnings per share 2016= Net profit 2015*1.09/ Weighted Average of Unit=$0.073
Earnings per share 2017=Net profit 2016*1.09/ Weighted Average of Unit=$0.08
Singapore
dollar (S$)
2012
2013 2014 2015 2016 2017 Average
Earnings
Per Share
0.0604 0.066 0.06 0.067 0.073 0.08
Dividend
Per Share
0.042 0.0436 0.0444 0.0453 0.0460 0.0465
Payout
Ratio
0.695 0.66 0.74 0.67 0.63 0.58 0.66
Required
Rate of
Return(re)
5.5% 5.5% 5.5% 5.5% 5.5% 5.5%
Dividend
Growth
Rate(g)
2% 2% 2% 2% 1.5% 1% 1.75%
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑃 𝐸⁄ 𝑅𝑎𝑡𝑖𝑜 = 𝑃0
𝐸𝑃𝑆0
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑃 𝐸⁄ 𝑅𝑎𝑡𝑖𝑜 =
𝐷0𝐸𝑃𝑆0
× (1 + 𝑔)
𝑅𝑒 − 𝑔
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑃 𝐸⁄ 𝑅𝑎𝑡𝑖𝑜 =0.66(1 + 0.0175)
(0.055 − 0.0175)
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑃 𝐸⁄ 𝑅𝑎𝑡𝑖𝑜 = 0.67
0.0375
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑃 𝐸⁄ 𝑅𝑎𝑡𝑖𝑜 = 17.87
We can derive the value of StarHill REIT in 2013 by calculating estimated value of P/E ratio multiply by forecasted
earnings per share.
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑆𝑡𝑎𝑟𝐻𝑖𝑙𝑙 𝑅𝐸𝐼𝑇 𝑖𝑛 2013 = 𝐸𝑃𝑆 × 𝑃 𝐸⁄ 𝑅𝑎𝑡𝑖𝑜
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑆𝑡𝑎𝑟𝐻𝑖𝑙𝑙 𝑅𝐸𝐼𝑇 𝑖𝑛 2013 = 𝑆$0.06 × 17.87
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑆𝑡𝑎𝑟𝐻𝑖𝑙𝑙 𝑅𝐸𝐼𝑇 𝑖𝑛 2013 = 𝑆$1.07
From the above calculation, the valuation of StarHill REIT is S$1.07 and the market price at 19 September
2013 is S$0.79. Hence, the market price is undervalued, we suggests that the investor should purchase the
StarHill REIT now in order to obtain a handsome profit. But, we must take note that the P/E ratio has the
limitation and it’s only a simple indicator.
One of the limitations of P/E ratio is placing the earning become the denominator of P/E ratio. There is likelihood for
the companies to change its earning to show the unreal profitable circumstances. For instance, each company can use
different accounting methods to neglect the certain expenses into consideration resulting in inaccurate P/E ratio values.
Moreover, each company adopts a difference accounting systems which make it meaningless to compare the P/E ratio.
The value of inventory and historical cost of depreciation may not show the true economic figure during the periods of
high inflation because the asset replacement expenditure would be increased, which means that inflation will affect the
earnings. Due to this reason, the P/E ratio is considered as inappropriate. In a nutshell, investors should not only look at
the P/E ratio to decide the investment decision.
Compare to StarHill Global REIT, Suntec REIT P/E ratio has lower P/E ratio which is 9.5810 (Bloomberg 2013). This
figure shows that the investors have a relatively low confidence on the Suntec REIT, they only willing to pay 9.58 times
to each expected earnings.
Price to Book Value The Book value is often used as a benchmark to assess the high or low, cheap or expensive the stocks of company. In
some cases, companies that will go for IPO often use book value as a benchmark. The greater the value of P/Bv means
the more expensive the stock price is. Hence, we can also deduce whether the stock is overvalued or undervalued. In
reality, there are many variations of price to book value. This is understandable given that the market price reflects the
price expectations of investors.
If investors’ expectations of the stocks are high, the demand for such stocks is also high, so the price in the market is
also relatively high. For companies like this, the market price is usually higher than the book value. Market price could
be twice, three times or even more than its book value. In contrast, the market price could also be lower than its book
value. The lower value of P/Bv is considered as undervalued which is good for long-term investment. This lower P/Bv
value must be caused the share price is below the book value or the actual value. However, the low value of P/BV can
also indicate a decline in the quality and performance of the issuer fundamentals (fundamentally wrong). Therefore, the
value of P/Bv should be compared to P/Bv sectors concerned. If it differs too much then it should be analysed more
deeply.
Interestingly, P/Bv is also a signal to the investors that the price we pay or invest in the company are too high or not if
it is assumed the company suddenly went bankrupt (bankrupt immediately). Because if the company goes bankrupt,
then the primary obligation is to pay the debts first, then the remaining assets (if any) shall be distributed to the
shareholders. The weakness of this financial ratio is where the value of equity is affected directly by the company’s
retained earning which is accumulated from profit/loss at the income statement.
So, the main concept of P/Bv is the market capitalization divided by its book value. Book value can be the basis of the
entire company or per share only. This ratio compares the market value of the apparent value of the company based on
the financial statement.
Nevertheless, P/Bv ratio for some types of firms is less powerful because the fundamental difficulties of traditional
accounting-based high-tech company. This company’s main asset is “intellectual property” that is “great value” which
is tough to be noted in regular financial accounting. Therefore, book value of this company does not reflect the true
richness of the technology companies.
We need to calculate the expected book value of the company and the expected book value per share before we calculate
the P/E book ratio.
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 (𝐹𝑌 2012) = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 − 𝐼𝑛𝑡𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝐴𝑠𝑠𝑒𝑡𝑠
Expected book value is computed as:
𝐸𝐵𝑣 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑏𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 × (1 + 𝑔)
𝐸𝐵𝑣 = 𝑆$ 1,871,894,000 × (1 + 0.02)
𝐸𝐵𝑣 = 𝑆$ 1,909,331,880
After calculating the expected book value, we need to find the expected book value by EBv / No. of outstanding shares.
The balance sheet of Starhill Global REIT in 2013 shows the number of shares outstanding.
Current share price as at (21th September 2013): S$ 0.78
The forecasted number of outstanding shares during 2013, 2014, and 2015 are 2,181,204,436.
Therefore,
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑏𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 = 1,909,331,880
2,181,204,436
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑏𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 = 0.875
Given that the current share price of StarHill at 2013 is S$ 0.78, the P/ Bv ratio for 2013:
𝑃𝑟𝑖𝑐𝑒𝑡
𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒𝑡+1=
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑆ℎ𝑎𝑟𝑒 𝑃𝑟𝑖𝑐𝑒
𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒𝑡+1
𝑃𝑟𝑖𝑐𝑒2013
𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒2014=
0.78
0.875
𝑃𝑟𝑖𝑐𝑒2013
𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒2014= 0.891
By using the forecasted growth rate of 2% the ratio indicates that SG REIT’s stock will be traded at 0.89 times its
expected book value of 0.875 per share. The purpose of this P/Bv is to give the exposure to investors to analyze the share
price before it is informed to public and push the price to go up. Alternatively, comparing P/Bv ratio against the historical
data is also a good way for analysis.
From the table below, it exhibits that the P/Bv ratio was increasing from 2008 to 2013. Normally, “value investors” will
prefer high P/Bv ratio while “growth investors” prefer relatively low P/Bv ratio.
Year 2008 2009 2010 2011 2012
Share Price 0.4107 0.525 0.625 0.565 0.785
Book Value (
S$ ‘000)
1,370,925 1,574,850 1,819,494 1,840,185 1,871,894
Weighted
Average
Number of
Shares
( S$ ‘000)
954,388 1,510,196 1,938,966 1,943,023 1,943,023
Book value
per share
1.436 1.043 0.938 0.947 0.963
P/BV 0.394 0.560 0.660 0.587 0.815
Table below indicated that SG REIT’s P/BV ratio is increasing along the five years. Throughout the period, P/BV
ratios were below 1. This implies that Starhill had traded below its book value before, which indicates it is good for
long-term investment. On the other hand, it also implies a decline in the quality and performance of the issuer
fundamentals
Year 2008 2009 2010 2011 2012
Starhill’s P/B
Ratio
0.394 0.560 0.660 0.587 0.815
Suntec’s P/B
Ratio
0.388 0.755 0.853 0.600 0.814
Table Comparison of P/B ratio of Starhill Global with Competitor
*Source: Ycharts 2013
Table… gives that Starhill’s P/BV ratio was smaller than Suntec’s ratio which means it is better Suntec REIT in terms
of opportunity for long-term investment. This implied that Starhill’s equity was more valuable opposed to Suntec’s.
Growt
h Rate
0.5% 1% 1.5% 2% 2.5% 3% 3.5%
EBV 1,881,253,4
70
1,890,612,9
40
1,899,972,4
10
1,909,331,8
80
1,918,691,3
50
1,928,050,8
20
1,937,410,2
90
EBVP
S
0.862 0.867 0.871 0.875 0.879 0.884 0.888
P/B 0.905 0.8997 0.896 0.890 0.886 0.882 0.878
Table P/B ratio over Growth Rate Sensitivity
Based on the table above, it shows that there are direct relationship between growth rate against expected book value
and the expected return which means the larger the growth rate, the larger the EBVPS will be. However there is an
inverse relationship between the P/B ratio and the growth rate. The rise in growth rate will decrease the P/B ratio. This
sensitivity analysis provides the measurement, accuracy, and the sensitivity of how the different growth rate value will
impact on P/BV ratio. Moreover, the accuracy of forecasted growth rate plays the important role in the calculation of
P/BV ratio to give more accurate figure.
From the table …, it indicates that Starhill’s P/BV ratio is smaller than Suntec’s current P/BV ratio. However,
Starhill’s P/BV ratio itself is greater than one and is considered to be relatively high. It is expected to be 0.891 in 2014
and therefore the shares could be high compared to Suntec, CapitaMall, CapitaRetail China, and Frasers Centrepoint.
Although the Starhill’s P/B ratio is greater than Suntec, its P/B ratio is below CapitaMall, CapitaRetail China and
Frasers Centrepoint. Therefore current Starhill’s P/B ratio is most likely to be undervalued which means investors
should buy.
Table Comparison of Starhill’s Current
P/B ratio with competitors
*Source: Bloomberg 2013
There are several factors that will
determine the P/BV value, such as stock
liquidity in the market, the number of
floating shares, etc. Sometimes, the stock
is fundamentally good but not liquid
enough so that the market price does not
reflect the real value of the book. Another
possibility is the market price of the same
or close to its book value.
Year Current P/B ratio
Starhill’s P/B Ratio 0.891
Suntec’s P/B ratio 0.830
CapitaMall Trust 1.16
CapitaRetail China Trust 0.9523
Frasers Centrepoint Trust 1.1960
Section 3
Share prices change due to their supply and demand change. For instance, if people are more willing to buy the share
rather than to sell their share, this result the price of the share will increase. On the other hand, if people are more willing
to sell rather than buy the stock, this result in the drop in price.
The movement of the stock price implies the valuation of the share of the investors. Moreover, the price of the stock
show firm’s current value and investors expected growth in the future. If the value of the company is lower than the
expected value, the price will go down vice versa.
In our calculation, we use 4 methods for company valuation which are Dividend Discounted Model (DDM),
Price/Earnings Ratio, Price/Book Value Ratio, and Free Cash Flow Equity (FCFE) valuation. Each model gives different
fair value. It is because of some assumptions and calculation adopted for each method.
Dividend Discount Model
Since establishing the present value of all future dividends is pretty hard, we use some assumptions in determining the
dividend discount models (DDMs). The commonly used assumption is that the dividends will grow at a constant rate
over time. DDM model mainly uses its data from Distributions Statement of company’s Financial Report. It is probably
appropriate for mature firms but mostly unreliable for fast-growing firms. More integrated DDM is for more intricate
growth forecasts such as two-stage growth models (a period of fast growth followed by a period of sustainable growth)
and three-stage growth models (a period of fast growth followed by a period of decreasing growth rates followed by a
period of constant growth). DDM believes that a stock is valued as the present value of all of its future dividend earnings.
However, there are some problems with DDM which also differentiate it from the other models. Those are:
a. The assumption of constant growth rates less than the cost of capital may not be rational.
b. If the stock tentatively does not issue a dividend, like mostly growth stock, we need more common versions of
the discounted dividend to value the stock. However, this uses earnings growth rather than dividend growth,
which may be different.
c. The Gordon model provides stock price which is hyper-sensitive to the growth rate.
d. DDM is a simple method for calculating the value of a company. DDM assumed that the dividends are the only cash flows pass to stockholders, which makes those companies that not paying the regular dividends become worth nothing. Companies that not paying regular dividends do not mean they are not making a profit but the profit is being reinvested back to those companies. One of the prominent companies that are not paying a regular dividend is Apple
Price/Earnings Ratio
Price Earnings Ratio is based on the company’s income statement. It determines the company’s value through the
amount of sales, earnings, or other components. P/E ratio gives a valuation comparison of a company’s current share
price divided by its earnings per share. P/E ratio depends heavily on data from profit/loss and other data such as dividend,
growth rate, Required Return (Re), net income, and number of shares. An estimation of the EPS for the company is
based on the sales forecast and the estimated profit margin. The sales forecast is an analysis of the relationship of
company sales to various relevant economic situations and to the industry series. Moreover, it also requires estimated
Model Fair Value ($) Actual Value ($) Evaluation
Dividend Discount Model (DDM)
0.84 0.79 Undervalued
Free Cash Flow to Equity (FCFE)
1.12 0.79 Undervalued
Price/Earnings Model 1.07 0.79 Undervalued Price/Book Value
Model 0.891 0.88 x Undervalued
company earnings multipliers from macro analysis and microanalysis (comparing Dividend-Payout Ratios and
estimating the Required Rate of Return, computing the earnings multiplier, and estimating intrinsic value). Normally
P/E ratio will be compared to the industry or sector where the company is in or the overall market. After comparing the
ratio, we could decide whether it is high or low, undervaluation, over valuation, or fair valuation. Companies which
have slow but steady growth are usually good to use P/E ratio since the revenue does not change quickly. However, fast-
growing companies P/E’s ratio may mislead investors. Highly fast-growing companies tend to have their best revenues
at the peak of the business cycle. Cyclical stocks will have greatly increase when the economy is buzzing, leading to
decrease their P/Es. Hence, low P/E does not truly so. While, the company’s expensive stocks may be at its cheapest
point. Since P/E is based on company’s future earnings growth, a company will be traded at higher P/E and larger PEG
ratio with a wide growth visibility. Moreover, P/E ratio is also influenced by investor’s sensitivity. High P/E ratio does
not necessarily come from low earnings per share but possibly because of investors’ sensitivity. Consequently, winners
prone to get too high P/E ratio which makes them overvalued while losers have the tendency to get undervalued stocks.
Therefore, generally the winners (high P/E stocks) will fall behind the previous losers (low P/E stocks). Mostly traders
will only look at forward P/E because they want to know the company’s value a year ahead.
Price/Book Ratio
P/B ratio is not used as frequent as P/E ratio, but it can provide useful information to investors as an intuitive measure
and relatively steady measure of value compared to market price. It is highly affected by the industry. The most
significant difference is on the use of capital such as Software Company versus Bank. P/B ratio attempts to reflect the
value of company’s balance sheet since it is predominantly counted from accounting convention. It is different with P/E
ratio since even companies with negative earnings can be evaluated by using P/B ratio. More liquid assets could bring
lower values on the balance sheet than their actual condition. In a recession, the P/B can be used as “bargain hunt” for
much undervalued companies. The actual low P/B may be a bell of financial crisis as the destruction of equity of the
company. Nonetheless, it may give inconsistent result when accounting standards differ broadly across companies
within the industry. The negative P/B ratio is also possible to appear as sustained negative earnings reports. Moreover,
P/B ratio does not take into account intangible assets which decrease the total asset value. Next, if there are substantial
differences in the asset intensity of production way among the companies will result different value. Moreover,
technological change and inflation will lead to different book and market value of assets.
The dividend growth rate will be influenced by the age of the industry life cycle, structural changes, industry
competition, and economic trends. Investor’s required rate of return has two basic components: the nominal risk-free
interest rate and a risk premium. Notably, we must estimate future risk premiums to determine the stock’s current
intrinsic value. The risk premium of the firm must rely on other information including evaluation of the financial
statements and capital market relationships. We begin with an estimate of beta using historical market information.
Because beta is affected by changes in a firm’s business and financial risks, as well as other influences, an investor
should increase or lower the historical beta estimate based on his or her analysis of the firm’s future risk characteristics.
Free Cash Flow to Equity Model
Net Income - (Capital Expenditures-Depreciation) - (Changes in Non-cash Working Capital) + (New Debt Issued-Debt
Repayments)
From the above formula, we can see that FCFE consider a lot more information about the cash flow than the other
models such as the net income is being subtracted by capital expenditures which include the acquisition and it also
consider that depreciation and amortization are being re-added because they represent non-cash charges. The changes
in non-cash working capital is being determined by the non-cash working capital. Finally, the cash flow is also being
affected by the changes in the level of debts. FCFE looked at the balance sheet, income statement and distribution
statement while the other models only consider one of those. For example, P/E ratio only looks at income statement,
P/B ratio looks at balance sheet and DDM looks at the distribution statement. Due to this reason, the FCFE is also has
a connection with DDM, P/E ratio and P/B ratio but the strong point of FCFE is that it does not predict payout ratio that
the company use which leads to ambiguity.
These forecasted prices generated by the four valuation models are being derived based on our assumption of the future
earnings of StarHill Global REIT. Therefore, our valuation is based on the accuracy of our forecast. There is no guarantee
about our forecast is true and accurate.
In a nutshell, our group recommends buying the StarHill Global REIT since its value now is trading on undervalued.
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Appendices
Appendix 1- Calculation of Market Return StarHill STI Index
Date Adj
Close
returns Date Adj
Close
returns
8/19/2013 0.77 -5% 8/19/2013 3088.85 -3%
8/12/2013 0.81 -2% 8/12/2013 3197.53 -1%
8/5/2013 0.83 -1% 8/5/2013 3229.91 -1%
7/29/2013 0.84 -2% 7/29/2013 3254.13 1%
7/22/2013 0.86 1% 7/22/2013 3236.1 1%
7/15/2013 0.85 1% 7/15/2013 3213.26 -1%
7/8/2013 0.84 0% 7/8/2013 3236.06 2%
7/1/2013 0.84 1% 7/1/2013 3169.73 1%
6/24/2013 0.83 1% 6/24/2013 3150.44 1%
6/17/2013 0.82 -5% 6/17/2013 3124.45 -1%
6/10/2013 0.86 -1% 6/10/2013 3161.43 -1%
6/3/2013 0.87 1% 6/3/2013 3184.72 -4%
5/27/2013 0.86 -5% 5/27/2013 3311.37 -2%
5/20/2013 0.91 -2% 5/20/2013 3393.17 -2%
5/13/2013 0.93 0% 5/13/2013 3449.3 0%
5/6/2013 0.93 -1% 5/6/2013 3443.77 2%
4/29/2013 0.94 0% 4/29/2013 3369.9 1%
4/22/2013 0.94 4% 4/22/2013 3348.87 2%
4/15/2013 0.9 -1% 4/15/2013 3294.05 0%
4/8/2013 0.91 5% 4/8/2013 3294.19 0%
4/1/2013 0.87 0% 4/1/2013 3299.78 0%
3/25/2013 0.87 1% 3/25/2013 3308.1 2%
3/18/2013 0.86 -2% 3/18/2013 3258.57 -1%
3/11/2013 0.88 0% 3/11/2013 3286.05 0%
3/4/2013 0.88 4% 3/4/2013 3289.53 1%
2/25/2013 0.85 0% 2/25/2013 3269.5 -1%
2/18/2013 0.85 -1% 2/18/2013 3288.13 0%
2/11/2013 0.86 4% 2/11/2013 3283.07 0%
2/4/2013 0.83 2% 2/4/2013 3270.3 -1%
1/28/2013 0.81 1% 1/28/2013 3291.14 1%
1/21/2013 0.8 1% 1/21/2013 3269.31 2%
1/14/2013 0.79 1% 1/14/2013 3211.22 0%
1/7/2013 0.78 3% 1/7/2013 3216.5 0%
12/31/2012 0.76 1% 12/31/2012 3225.22 1%
12/24/2012 0.75 3% 12/24/2012 3191.8 1%
12/17/2012 0.73 1% 12/17/2012 3163.56 0%
12/10/2012 0.72 0% 12/10/2012 3168.43 2%
12/3/2012 0.72 0% 12/3/2012 3107.11 1%
11/26/2012 0.72 -1% 11/26/2012 3069.95 3%
11/19/2012 0.73 0% 11/19/2012 2989.28 1%
11/12/2012 0.73 0% 11/12/2012 2945.63 -2%
11/5/2012 0.73 -3% 11/5/2012 3009.56 -1%
10/29/2012 0.75 1% 10/29/2012 3040.75 -1%
10/22/2012 0.74 0% 10/22/2012 3057.51 0%
10/15/2012 0.74 0% 10/15/2012 3048.92 0%
10/8/2012 0.74 -1% 10/8/2012 3041.75 -2%
10/1/2012 0.75 4% 10/1/2012 3107.87 2%
9/24/2012 0.72 -1% 9/24/2012 3060.34 -1%
9/17/2012 0.73 4% 9/17/2012 3078.23 0%
9/10/2012 0.7 0% 9/10/2012 3070.42 2%
9/3/2012 0.7 0% 9/3/2012 3011.7 0%
8/27/2012 0.7 0% 8/27/2012 3025.46 -1%
8/20/2012 0.7 1% 8/20/2012 3050.49 0%
8/13/2012 0.69 -1% 8/13/2012 3062.11 0%
8/6/2012 0.7 0% 8/6/2012 3054.2 0%
7/30/2012 0.7 3% 7/30/2012 3051.33 2%
7/23/2012 0.68 5% 7/23/2012 2998.49 -1%
7/16/2012 0.65 0% 7/16/2012 3015.53 1%
7/9/2012 0.65 3% 7/9/2012 2995.56 1%
7/2/2012 0.63 2% 7/2/2012 2978.55 3%
6/25/2012 0.62 3% 6/25/2012 2878.45 2%
6/18/2012 0.6 2% 6/18/2012 2828.09 1%
6/11/2012 0.59 4% 6/11/2012 2811 3%
6/4/2012 0.57 -3% 6/6/2012 2737.89 0%
5/28/2012 0.59 0% 5/28/2012 2745.71 -1%
5/21/2012 0.59 2% 5/22/2012 2772.75 0%
5/14/2012 0.58 -3% 5/14/2012 2779.1 -4%
5/7/2012 0.6 0% 5/7/2012 2887.34 -3%
4/30/2012 0.6 0% 4/30/2012 2990.59 0%
4/23/2012 0.6 2% 4/23/2012 2981.58 0%
4/16/2012 0.59 0% 4/16/2012 2994.48 0%
4/9/2012 0.59 0% 4/9/2012 2987.82 0%
4/2/2012 0.59 0% 4/2/2012 2986.2 -1%
3/26/2012 0.59 0% 3/26/2012 3010.46 1%
3/19/2012 0.59 2% 3/19/2012 2990.08 -1%
3/12/2012 0.58 2% 3/12/2012 3010.68 2%
3/5/2012 0.57 0% 3/5/2012 2963.15 -1%
2/27/2012 0.57 4% 2/27/2012 2993.49 1%
2/20/2012 0.55 0% 2/21/2012 2978.08 -1%
2/13/2012 0.55 -2% 2/13/2012 3000.59 1%
2/6/2012 0.56 4% 2/6/2012 2960 1%
1/30/2012 0.54 0% 1/30/2012 2917.95 0%
1/23/2012 0.54 2% 1/23/2012 2916.26 2%
1/16/2012 0.53 0% 1/16/2012 2849.38 2%
1/9/2012 0.53 2% 1/9/2012 2791.54 3%
1/2/2012 0.52 2% 1/3/2012 2715.59 3%
12/26/2011 0.51 0% 12/27/2011 2646.35 -1%
12/19/2011 0.51 0% 12/19/2011 2676.47 1%
12/12/2011 0.51 0% 12/12/2011 2659.22 -1%
12/5/2011 0.51 -2% 12/5/2011 2694.6 -3%
11/28/2011 0.52 0% 11/28/2011 2773.36 5%
11/21/2011 0.52 0% 11/21/2011 2643.93 -3%
11/14/2011 0.52 0% 11/14/2011 2730.34 -2%
11/8/2011 0.52 -4% 11/7/2011 2790.94 -2%
10/31/2011 0.54 0% 10/31/2011 2848.24 -2%
10/24/2011 0.54 2% 10/24/2011 2905.72 7%
10/17/2011 0.53 2% 10/17/2011 2712.41 -1%
10/10/2011 0.52 2% 10/10/2011 2744.17 4%
10/3/2011 0.51 0% 10/3/2011 2640.3 -1%
9/26/2011 0.51 -2% 9/26/2011 2675.16 -1%
9/19/2011 0.52 -4% 9/19/2011 2698.8 -3%
9/12/2011 0.54 -2% 9/12/2011 2789.04 -1%
9/5/2011 0.55 0% 9/5/2011 2825.39 -1%
8/29/2011 0.55 2% 8/29/2011 2843.09 3%
8/22/2011 0.54 2% 8/22/2011 2748.18 1%
8/15/2011 0.53 -2% 8/15/2011 2733.63 -4%
8/8/2011 0.54 -4% 8/8/2011 2850.59 -5%
8/1/2011 0.56 -2% 8/1/2011 2994.78 -6%
7/25/2011 0.57 0% 7/25/2011 3189.26 0%
7/18/2011 0.57 2% 7/18/2011 3182.95 3%
7/11/2011 0.56 -2% 7/11/2011 3084.24 -2%
7/4/2011 0.57 0% 7/5/2011 3151.28 0%
6/27/2011 0.57 4% 6/27/2011 3139.01 2%
6/20/2011 0.55 2% 6/20/2011 3066.85 2%
6/13/2011 0.54 0% 6/13/2011 3005.28 -2%
6/6/2011 0.54 -2% 6/6/2011 3078.35 -2%
5/30/2011 0.55 -2% 5/31/2011 3145.67 0%
5/23/2011 0.56 0% 5/23/2011 3135.52 -1%
5/16/2011 0.56 2% 5/16/2011 3168.54 0%
5/9/2011 0.55 2% 5/9/2011 3163.68 2%
5/3/2011 0.54 0% 5/2/2011 3099.52 -2%
4/25/2011 0.54 2% 4/25/2011 3172.73 -1%
4/18/2011 0.53 -2% 4/18/2011 3194.73 1%
4/11/2011 0.54 0% 4/11/2011 3153.3 -1%
4/4/2011 0.54 0% 4/4/2011 3187.31 2%
3/28/2011 0.54 2% 3/28/2011 3120.47 2%
3/21/2011 0.53 -2% 3/21/2011 3070.84 5%
3/14/2011 0.54 0% 3/14/2011 2935.78 -4%
3/7/2011 0.54 -2% 3/7/2011 3043.49 -1%
2/28/2011 0.55 2% 2/28/2011 3061.31 1%
2/21/2011 0.54 -2% 2/22/2011 3025.16 -2%
2/14/2011 0.55 2% 2/14/2011 3086.92 0%
2/7/2011 0.54 0% 2/7/2011 3077.27 -4%
1/31/2011 0.54 0% 1/31/2011 3211.12 -1%
1/24/2011 0.54 0% 1/24/2011 3229.69 1%
1/17/2011 0.54 -2% 1/17/2011 3184.6 -2%
1/10/2011 0.55 4% 1/10/2011 3245.96 0%
1/3/2011 0.53 0% 1/3/2011 3261.35 2%
12/27/2010 0.53 2% 12/27/2010 3190.04 1%
12/20/2010 0.52 2% 12/20/2010 3143.8 0%
12/13/2010 0.51 -2% 12/13/2010 3153.01 -1%
12/6/2010 0.52 0% 12/6/2010 3185.42 0%
11/29/2010 0.52 2% 11/29/2010 3172.44 0%
11/22/2010 0.51 0% 11/22/2010 3158.08 -1%
11/15/2010 0.51 -2% 11/15/2010 3197.37 -2%
11/8/2010 0.52 0% 11/8/2010 3252 0%
11/1/2010 0.52 2% 11/1/2010 3240.31 3%
10/25/2010 0.51 2% 10/25/2010 3142.62 -1%
10/18/2010 0.5 0% 10/18/2010 3173.57 -1%
10/11/2010 0.5 2% 10/11/2010 3204.27 2%
10/4/2010 0.49 0% 10/4/2010 3153.34 1%
9/27/2010 0.49 0% 9/27/2010 3130.9 1%
9/20/2010 0.49 0% 9/20/2010 3092.68 1%
9/13/2010 0.49 0% 9/13/2010 3076.37 2%
9/6/2010 0.49 2% 9/6/2010 3022.28 1%
8/30/2010 0.48 2% 8/30/2010 3002.56 2%
8/23/2010 0.47 2% 8/23/2010 2938.74 0%
8/16/2010 0.46 0% 8/16/2010 2936.48 0%
8/10/2010 0.46 -2% 8/9/2010 2939.97 -2%
8/2/2010 0.47 0% 8/3/2010 2995.06 0%
7/26/2010 0.47 -2% 7/26/2010 2987.7 0%
7/19/2010 0.48 0% 7/19/2010 2973.47 1%
7/12/2010 0.48 2% 7/12/2010 2957.72 1%
7/5/2010 0.47 4% 7/5/2010 2917.17 3%
6/28/2010 0.45 0% 6/28/2010 2844.19 0%
6/21/2010 0.45 0% 6/21/2010 2851.64 1%
6/14/2010 0.45 0% 6/14/2010 2833.4 1%
6/7/2010 0.45 0% 6/7/2010 2796.29 0%
5/31/2010 0.45 2% 5/31/2010 2806.51 2%
5/24/2010 0.44 0% 5/24/2010 2739.7 1%
5/17/2010 0.44 -6% 5/17/2010 2701.2 -5%
5/10/2010 0.47 4% 5/10/2010 2855.21 1%
5/3/2010 0.45 -8% 5/3/2010 2821.11 -5%
4/26/2010 0.49 -4% 4/26/2010 2974.61 0%
4/19/2010 0.51 9% 4/19/2010 2988.49 -1%
4/12/2010 0.47 0% 4/12/2010 3007.19 1%
4/5/2010 0.47 4% 4/5/2010 2971.97 1%
3/29/2010 0.45 0% 3/29/2010 2943.02 1%
3/22/2010 0.45 0% 3/22/2010 2906.28 0%
3/15/2010 0.45 0% 3/15/2010 2915.7 1%
3/8/2010 0.45 2% 3/8/2010 2881.36 3%
3/1/2010 0.44 2% 3/1/2010 2790.29 1%
2/22/2010 0.43 -2% 2/22/2010 2750.86 0%
2/17/2010 0.44 0% 2/15/2010 2757.14 0%
2/8/2010 0.44 2% 2/8/2010 2758.9 3%
2/1/2010 0.43 0% 2/1/2010 2683.56 -2%
1/25/2010 0.43 -4% 1/25/2010 2745.35 -3%
1/18/2010 0.45 -2% 1/18/2010 2819.71 -3%
1/11/2010 0.46 5% 1/11/2010 2908.42 0%
1/4/2010 0.44 5% 1/4/2010 2922.76 1%
12/28/2009 0.42 2% 12/28/2009 2897.62 2%
12/21/2009 0.41 -5% 12/21/2009 2837.7 1%
12/14/2009 0.43 5% 12/14/2009 2802.59 0%
12/7/2009 0.41 -5% 12/7/2009 2800.75 0%
11/30/2009 0.43 2% 11/30/2009 2791.01 1%
11/23/2009 0.42 -2% 11/23/2009 2762.22 0%
11/16/2009 0.43 -4% 11/16/2009 2761.54 1%
11/9/2009 0.45 0% 11/9/2009 2727.23 3%
11/2/2009 0.45 -4% 11/2/2009 2658.21 0%
10/26/2009 0.47 -4% 10/26/2009 2651.13 -2%
10/19/2009 0.49 0% 10/19/2009 2715.34 0%
10/12/2009 0.49 0% 10/12/2009 2708.12 2%
10/5/2009 0.49 2% 10/5/2009 2652.51 2%
9/28/2009 0.48 -2% 9/28/2009 2604.53 -2%
9/21/2009 0.49 0% 9/21/2009 2662.82 1%
9/14/2009 0.49 11% 9/14/2009 2647.91 -1%
9/7/2009 0.44 0% 9/8/2009 2681.03 2%
8/31/2009 0.44 0% 8/31/2009 2622.69 -1%
8/24/2009 0.44 7% 8/24/2009 2642.8 4%
8/17/2009 0.41 -5% 8/17/2009 2544.86 -3%
8/10/2009 0.43 2% 8/10/2009 2631.51 3%
8/3/2009 0.42 -5% 8/3/2009 2549.35 -4%
7/27/2009 0.44 10% 7/27/2009 2659.2 5%
7/20/2009 0.4 3% 7/20/2009 2533.43 4%
7/13/2009 0.39 -17% 7/13/2009 2430.96 5%
7/6/2009 0.47 -8% 7/6/2009 2307.98 0%
6/29/2009 0.51 0% 6/29/2009 2299.75 -1%
6/22/2009 0.51 0% 6/22/2009 2317.95 2%
6/15/2009 0.51 -11% 6/15/2009 2273.18 -4%
6/8/2009 0.57 -5% 6/8/2009 2377.07 -1%
6/1/2009 0.6 5% 6/1/2009 2396.35 3%
5/25/2009 0.57 14% 5/25/2009 2329.08 4%
5/18/2009 0.5 4% 5/18/2009 2245.27 5%
5/11/2009 0.48 0% 5/11/2009 2139.78 -4%
5/4/2009 0.48 30% 5/4/2009 2238.21 17%
4/27/2009 0.37 0% 4/27/2009 1920.28 4%
4/20/2009 0.37 3% 4/20/2009 1852.85 -2%
4/13/2009 0.36 6% 4/13/2009 1896.56 4%
4/6/2009 0.34 -6% 4/6/2009 1828.51 0%
3/30/2009 0.36 -3% 3/30/2009 1820.87 4%
3/23/2009 0.37 12% 3/23/2009 1745.66 9%
3/16/2009 0.33 6% 3/16/2009 1596.92 1%
3/9/2009 0.31 -3% 3/9/2009 1577.52 4%
3/2/2009 0.32 -11% 3/2/2009 1513.12 -5%
2/23/2009 0.36 -3% 2/23/2009 1594.87 0%
2/16/2009 0.37 -3% 2/17/2009 1594.94 -6%
2/9/2009 0.38 3% 2/9/2009 1705.64 -1%
2/2/2009 0.37 -3% 2/2/2009 1715.35 -2%
1/28/2009 0.38 3% 1/28/2009 1746.47 4%
1/19/2009 0.37 0% 1/19/2009 1685.23 -3%
1/12/2009 0.37 -8% 1/12/2009 1730.45 -4%
1/5/2009 0.4 -2% 1/5/2009 1806.02 -1%
12/29/2008 0.41 2% 12/29/2008 1829.71 6%
12/22/2008 0.4 -5% 12/22/2008 1725.61 -4%
12/15/2008 0.42 14% 12/16/2008 1795.47 3%
12/9/2008 0.37 0% 12/8/2008 1740.34 5%
12/1/2008 0.37 0% 12/1/2008 1659.17 -4%
11/24/2008 0.37 6% 11/24/2008 1732.57 4%
11/17/2008 0.35 -13% 11/17/2008 1662.1 -6%
11/10/2008 0.4 -2% 11/10/2008 1759.14 -6%
11/3/2008 0.41 5% 11/3/2008 1863.49 4%
10/28/2008 0.39 -3% 10/27/2008 1794.2 12%
10/20/2008 0.4 -7% 10/20/2008 1600.28 -15%
10/13/2008 0.43 -16% 10/13/2008 1878.51 -4%
10/6/2008 0.51 -12% 10/6/2008 1948.33 -15%
9/29/2008 0.58 -11% 9/29/2008 2297.12 -5%
9/22/2008 0.65 5% 9/22/2008 2411.46 -6%
9/15/2008 0.62 -14% 9/15/2008 2559.07 0%
9/8/2008 0.72 -8% 9/8/2008 2570.67 0%
9/1/2008 0.78 0% 9/1/2008 2574.21 -6%
8/25/2008 0.78 0% 8/25/2008 2739.95 1%
8/18/2008 0.78 -3% 8/18/2008 2723.3 -3%
8/11/2008 0.8 -4% 8/11/2008 2797.5 0%
8/4/2008 0.83 4% 8/4/2008 2807.54 -3%
7/28/2008 0.8 1% 7/28/2008 2906.07 -1%
7/21/2008 0.79 5% 7/21/2008 2922.91 3%
7/14/2008 0.75 -7% 7/14/2008 2847.73 -3%
7/7/2008 0.81 8% 7/7/2008 2926.84 2%
6/30/2008 0.75 -3% 6/30/2008 2880.45 -3%
6/23/2008 0.77 -6% 6/23/2008 2955.91 -2%
6/16/2008 0.82 -6% 6/16/2008 3001.81 1%
6/9/2008 0.87 0% 6/9/2008 2979.56 -5%
6/2/2008 0.87 -3% 6/2/2008 3146.73 -1%
5/26/2008 0.9 2% 5/26/2008 3192.62 2%
5/20/2008 0.88 0% 5/20/2008 3122.15 -4%
5/12/2008 0.88 -2% 5/12/2008 3241.49 3%
5/5/2008 0.9 -1% 5/5/2008 3162.03 -2%
4/28/2008 0.91 0% 4/28/2008 3236.1 1%
4/21/2008 0.91 -2% 4/21/2008 3189.2 2%
4/14/2008 0.93 -1% 4/14/2008 3124.87 0%
4/7/2008 0.94 3% 4/7/2008 3126.87 -1%
3/31/2008 0.91 0% 3/31/2008 3155.56 4%
3/24/2008 0.91 3% 3/24/2008 3031.9 7%
3/17/2008 0.88 -3% 3/17/2008 2824.91 0%
3/10/2008 0.91 7% 3/10/2008 2839.01 -1%
3/3/2008 0.85 -7% 3/3/2008 2866.28 -5%
2/25/2008 0.91 3% 2/25/2008 3026.45 -1%
2/18/2008 0.88 13% 2/19/2008 3048.64 -1%
2/11/2008 0.78 0% 2/11/2008 3088.68 5%
2/4/2008 0.78 0% 2/4/2008 2931.97 -3%
1/28/2008 0.78 1/28/2008 3007.8
Appendix 2 -Dividend Calculation Year Dividends
2006 0.059 1%
2007 0.0598 17%
2008 0.0698 -6%
2009 0.0657 -42%
2010 0.0383 8%
2011 0.0415 3%
2012 0.0427
Appendix 3- Data Table 1.0
2005
Percen
tage
Changes (%)
2006
Percen
tage
Changes (%)
2007
Percen
tage
Changes (%)
2008
Percen
tage
Changes (%)
2009
Percen
tage
Changes (%)
2010
Percen
tage
Changes (%)
2011
Percen
tage
Changes (%)
2012
(S$’0
00)
(S$’0
00)
(S$’0
00)
(S$’0
00)
(S$’0
00)
(S$’0
00)
(S$’0
00)
(S$’0
00)
Gross Revenu
e
25209 256.52 89876 14.56 10295
9 23.39
12704
2 5.97
13462
1 23.06
16566
7 8.70
18008
8 3.29
18600
5
Net Propert
y
Income (NPI)
19437 256.29 69252 10.92 76814 24.83 95884 11.54 106949
21.98 130458
10.06 143585
3.39 148447
Net
Income Before
Tax
12680 266.03 46412 6.46 49410 19.35 58972
Net
Income
After Tax
64859 25.34 81296 8.57 88265 9.51 96655
Distribu
table Income
14911 294.97 58894 0.24 59038 17.60 69427 8.72 75482 9.25 82465 10.08 90777 5.96 96188
Distribu
tion Per
Unit (DPU)
1.58
cents 266.00
5.79
cents 6.91
6.19
cents -42.16
3.58
cents 6.15
3.8
cents 2.63
3.9
cents 5.64
4.12
cents 6.55
4.39
cents
Portfoli
o Valuati
on
1,327,
000 12.9
1,498,
000 47.43
2,208,
574 -4.77
2,103,278
-5.78
1,981,
786 33.94
2,654,465
2.08
2,709,726
0.12
2,713,003
