KUCHING: The recent announcement of Sunway Real Estate Investment Trust (Sunway REIT) showed declining contribution from office and hospitality segments due to the non-renewals of tenancies.
However, according to an analyst from RHB Research Institute Sdn Bhd (RHB Research) Alia Arwina Izyani Azani in her report on the group, one of Sunway Tower’s existing tenant has given a strong indication of taking up the space that was vacated by a previous tenant, and hence could result in better contribution from this segment.
“Meanwhile, the drop in revenue from the hospitality segment was attributed to lower occupancy in the hotels due to the ‘novelty factor’ of some newly-opened hotels and attractions in 2012, particularly in Johor,” she highlighted in the report.
“There were also less Meetings, Incentives, Conventions and Exhibitions (MICE) and corporate events during the second quarter of the financial year 2013 (2QFY13) as there have been a number of cancellation (or postponement) of events in light of the upcoming general election.
“Nonetheless, with the retail segment remaining as Sunway REIT’s largest income contributor (68 per cent of total net property income), we believe that the decline in the office and hospitality segments will be compensated by the stronger growth in the retail segment.”
To note, Sunway REIT’s realised net profit for the second quarter of the financial year ending June 2013 (2QFY06/13) stood at RM56.1 million which was in line with consensus and RHB Research’s estimates.
A 3.16 sen dividend per unit was declared during the quarter, including the advanced distribution of 0.97 sen for the period of January 1 to February 5, 2013.
Alia Arwina also highlighted the announcement of Sunway REIT’s contract for the refurbishment of its Sunway Putra Mall worth RM258.4 million, being awarded to Sunway Construction Sdn Bhd, a wholly-owned subsidiary of Sunway REIT’s sponsor, Sunway Bhd.
“The contract, which includes the construction of a new retail area, upgrading of the building façade as well as the construction of a pedestrian link bridge to the LRT station, is expected to take about 22 months.
“Construction work is expected to start in April. Tenants have started to slowly move out of Sunway Putra Mall ahead of the renovation, and current occupancy for the mall stands at 73.1 per cent.”
In other news, Sunway REIT also announced that it had completed the acquisition of Sunway Medical Centre on December 31 last year. Alia Arwina expected this centre to contribute positively from 3QF13 onwards.
“Sunway REIT’s gearing has increased to 37.3 per cent (against 1QFT13 of 33.5 per cent) as management has decided to complete the transaction through debt funding. However, the proceeds from the upcoming placement of new units (expected in February) will likely be used to repay the debt and pare down gearing.”
This all led to RHB Research capping a neutral stance on the REIT with a fair value of RM1.63 per unit.