KUCHING: Sunway Real Estate Investment Trust’s (Sunway REIT) results for the financial year 2012 ending June (FY12) have been in line with consensus expectations, with a realised net income (RNI) of RM191 million.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) in a research report yesterday stated that FY12 RNI grew 14 per cent, underpinned by a 7.5 per cent organic growth from existing assets and stronger contributions from Sunway Putra Place (SPP).
“FY12 saw positive rental reversions of 13.3 per cent in three years (driven mainly by Sunway Pyramid, Sunway Putra Mall and Sunway Putra Tower) with a stable occupancy rate of 98.6 per cent.
“Sunway REIT remains positive on its retail and hospitality segment but is cautious on the office segment due to oversupply condition here.
“As landlords tend to prioritise occupancy over rates in these situations, maintaining strong positive rental reversions is tough in the office segment,” the research house elaborated.
The research house noted that FY13 estimated capital expenditure would amount to RM160 million, which would be mainly for refurbishments at the SPP Mall, scheduled to be closed in the third quarter (3Q) of 2013.”
Sunway REIT guided that there could be potential new acquisitions this year, it said, but had not indicated if the upcoming asset injections would come from its parent or third parties.
The REIT’s current net gearing was at 33 per cent, close to the comfort level of 35 per cent; hence Kenanga Research expected new placements to take place if the asset size would be more than RM80 million.
Meanwhile, OSK Research Sdn Bhd (OSK Research) noted that Sunway REIT had declared a dividend per unit (DPU) of 1.89 sen for the 4QFY12, which would bring the total accumulated DPU for FY12 to 7.5 sen, beating the in-house forecast of seven sen per unit.
“Via its proactive Capital Management Programme (CMP), which was set up to take advantage of the prevailing accommodative low interest rate environment, the group managed to lower its cost of debt from 4.65 per cent FY11 to 3.73 per cent in FY12.
“Sunway REIT recorded a fair value gain of RM230.2 million, which brings its total assets value to RM4.63 billion as at end-FY12, up from RM4.379 billion in the previous year.”
Maintaining its FY13 forecasts and introducing FY14 numbers, OSK Research raised the far value for the stock to RM1.59 per unit from RM1.25 per unit previously, based on a target yield of 4.8 per cent on FY13 DPU.
Meanwhile, Kenanga Research’s ‘immaterial changes’ to FY13 and FY14 estimated RNI of RM202 million to RM207 had already imputed SPP Mall’s ‘offline’ period. It maintained the REIT’s target price of RM1.42 per unit, premised on targeted FY13 estimated net yield of five per cent.
“Valuations are extremely stretched given the run-up of quality defensive stocks but the upcoming listing of IGB REIT and the potential REIT-ing of KLCC Property Holdings Bhd’s assets will keep valuations at current lofty levels,” the research house said of the REIT sector.