Sunway REIT to weather Covid-19 storm

Assets and balanced portfolio the advantage

PETALING JAYA: Sunway Real Estate Investment Trust (Sunway REIT) is capable of standing the test of time in the longer term due to its integrated asset cluster within a mature township, as well as its efforts in building a more balanced portfolio.

MIDF Research in a report yesterday said the stock’s price-to-net asset value of one times is deemed attractive, while the dividend yield is expected to be 5.1%.

“In view of the adverse impact Covid-19 has on Sunway REIT’S retail and hotel segment, we are revising our rental income assumption for the retail segment, as well as the occupancy rate and average daily rate for the hotel segment.

“While we are cautious of the performance of the retail segment in the near term, we believe that footfold may recover over time, as going to shopping malls is one of the leisure activities enjoyed by Malaysians.”

While consumers have evidently shopped more online, MIDF Research said the experience at the shopping malls cannot be fully replicated online, adding that retailers will be more creative in attracting consumers to visit physical stores or strengthen their omni-channel strategies.

“While we expect the upcoming quarter to be subdued, we do expect recovery in the following quarters. On top of that, we believe that the REIT manager will continue to diversify its portfolio so that earnings will remain robust.”

Hong Leong Investment Bank (HLIB) said Sunway REIT will be affected more profoundly during the fourth quarter, due to prolonged rental supports for non-essential retail tenants during the movement control order (MCO) period, lower sales turnover, as well as deteriorating occupancy rates for the hotel segment.

“However, its office segment is relatively more insulated and stable, in view that these office properties are located in established locations.

“Furthermore, their services segment and ‘industrial and others’ segment are expected to remain stable and continue to perform as usual despite the crisis, as they are generally unaffected by Covid-19 and the MCO.”

To tackle the rise in Covid-19 infections in the country, the government implemented the MCO on March 18. On May 4, a conditional MCO (CMCO) was enforced to allow businesses to re-open to help the economy to recover. The CMCO has been extended to June

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Sunway REIT reported a net profit of Rm65.66mil for its third quarter ended March

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This compares with Rm68.91mil in the previous corresponding period, while revenue came in at Rm140.80mil compared with Rm151.50mil a year earlier.

For the nine-month period ended March 31, 2020, Sunway REIT’S net profit rose to Rm221.69mil from Rm208.37mil in the previous corresponding period.

Revenue, meanwhile, grew to Rm451.95mil from Rm434.74mil a year earlier.

UOB Kay Hian said Sunway REIT’S earnings were within expectations.

“Earnings for the quarter declined mainly due to weaker retail and hotel segments, impacted by the Covid-19 pandemic,” it said.

“While we are cautious of the performance of the retail segment in the near term, we believe that foothold may recover over time.” MIDF Research