Stable performance. Starhill Global REIT (SGREIT) reported 1Q09 results in line with our expectations. Gross revenues and NPI grew by 13% and 17% to S$34.3m and S$27.1m respectively. NPI margins improved to 80% from 76% due to (i) higher revenues post its Toshin rent review in July'08, (ii) positive rental reversions for certain office space (+110% from preceding rents), (iii) aided by savings from property rebates enjoyed during the quarter. Distributable income came in at 7% higher yoy, translating to DPU of 1.87 Scts. For 1Q09, SGREIT is retaining c.5% of income available for distribution for working capital purposes.

Strong financial metrics. Gearing remained relatively low at 30%, interest cover at 4.9x. while NAV stands at S$1.43.

39% of space up for renewal in FY09-10. Looking ahead, SGREIT has c. 15%(FY09) and 24%(FY10) of its income up for renewal in an increasingly tough operating climate. We estimate asking rents for its office and retail space to decline by 10-50% over the next 2 years. Vacancy levels is also estimated to increase by 5 -10%.

Maintain HOLD, TP maintained at S$0.60. SGREIT currently trades at 0.3x P/BV, below peers average of 0.4x P/BV. Newsflow from discretionary shopping is expected to continue remain lackluster, capping re-rating opportunities. As such, maintain HOLD, TP $0.60. Currently, SGREIT offers FY09-10 yield of 14-15%.