Sunway-reit performance beats expectations

PETALING JAYA: Sunway Real Estate Investment Trust’s (Sunway-reit) results for the nine months ended Sept 30 came in above expectations.

CGS-CIMB Research noted the nine-month operating performance was anchored by the sustained recovery momentum of its retail assets and the further improvement of hotel occupancy rates.

“Rental assistance was minimal in the nine months and came on the back of strong tenant sales, at about 10% to 15% above pre-pandemic levels.

“The core net profit for the nine months accounted for 78% to 84% of our and Bloomberg’s consensus full-year estimates and was above expectations as the quarter is seasonally a strong year-end festivity-driven period,” CGS-CIMB Research said.

The research house said in its report that although overall retail footfall remained slightly below pre-pandemic levels, Sunwayreit’s retail segment (96% occupancy rate) continued to be strong during the nine months.

“The retail segment’s revenue grew 75% year-on-year, driven by Sunway Pyramid Mall,” said CGS-CIMB Research.

“The group’s guidance for positive rental reversion in the mid-single digits for fiscal year 2022 (FY22) remains unchanged. The hotel segment’s performance came on the back of pent-up domestic travel demand.”

The research house also expects the hotel segment to benefit from the festive season and end-of-year travels in the fourth quarter of 2022 (4Q22), supported by contributions from the Phase 1 reopening of Sunway Resort Hotel.

In its latest report, TA Research said Sunway-reit’s retail consumer traffic and tenant sales have improved since 4Q21, with tenants’ retail sales sustained above pre-pandemic levels.

“As a result, the retail segment is expected to perform stronger in FY22, thanks to reduced rental rebates, the completion of the

Sunway Carnival Mall Extension in 2Q22, and the addition of new retail space as a result of ongoing asset enhancement initiatives.”

The research house also said the company’s performance in the office, industrial and other segments would remain stable.

“Meanwhile, management expects the hotel segment to progressively benefit from travel activities.”

TA Research is maintaining its target price of RM1.53 for the stock, based on a target yield of 6% to its distribution per unit projection of 9.2 sen per unit. target yield is based on a 150-basis-point spread to our 10-year Malaysian Government Securities yield target of 4.5%,” TA Research noted.