Sunway REIT prospects still positive, retail division leading

KUCHING: Sunway Real Estate Investment Trust’s ( Sunway REIT) prospects has been viewed as still positive, with its retail division leading the REIT’s growth.

In a report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) noted that Sunway REIT’s second quarter of the financial year 2017 (2QFY17) higher earnings were mainly driven by the increased earnings contribution from its retail division and Sunway Medical Centre which partly mitigated the weaker earnings from hotel and office divisions.

It added, net property income ( NPI) of retail division climbed 10.9 per cent year- on-year (y- oy) to RM142.3 million as Sunway Pyramid Shopping Mall, Sunway Carnival, and Sunway Putra Mall contributed higher rental income.

“We revised upwards our earnings forecast for FY17/18 by 1.8 and 1.6 per cent after factoring in the earnings contribution from the recently announced industrial asset acquisition.

“We forecast Sunway REIT earnings to grow six per cent y- o-y in FY17 as we continue to see positive earnings outlook for Sunway REIT.

“We expect its retail division (contributed 74.6 per cent of NPI in 6MFY17) to grow steadily, underpinned by higher rental from Sunway Pyramid, Sunway Carnival, and Sunway Putra Mall,” it projected. It added, it expect expect the REIT’s office division to recover gradually in FY17 from low base in FY16 hence render limited earnings downside risk.

Meanwhile, AllianceDBS Research Sdn Bhd (AllianceDBS Research) noted that Sunway Pyramid Hotel was closed for refurbishment in April 2016 but has been progressively opened from 2QFY17.

“In 2QFY17, the average occupancy rate for the hotel stood at 78.2 per cent based on total refurbished rooms of 316 rooms. The occupancy level before closure was at 55 per cent with total inventory of 564 rooms. The hotel is expected to fully re-open in 4QFY17.

“The NPI foregone at full available room inventory (RM18 million in FY15) will be offset by the recent inclusion of new assets,” it said.

Aside from that, AllianceDBS Research said it remained positive on the outlook for Sunway Resort City township.

“It is already registering strong visitations of 40 million per annum. And, visitations should leap with the completion of the BRT-Sunway Line – a 6km elevated bus rapid transit path that will connect seven key public transport stations.

“In addition, ongoing developments at Sunway Pyramid Phase 3 – an integrated retail and hotel project by the Sunway Group – will improve the township’s appeal to locals and tourists.

“Sunway REIT is expected to benefit from the ongoing rejuvenation of the township. And apart from Sunway Pyramid, the REIT has four other assets – Sunway Resort, Hotel & Spa, Pyramid Tower hotel, Menara Sunway office tower, and Sunway Medical Centre.