Wednesday, November 29

Sunway REIT to benefit from higher rental income


KUCHING: Sunway Real Estate Investment Trust (Sunway REIT) expects its retail and hospitality segments to continue to drive its net property income (NPI) in the near future.

The research division of Maybank Investment Bank Bhd (Maybank Research) said the Sunway Pyramid Shopping Mall will be the mainstay of key earnings for the company.

The research firm noted that the real estate investment trust’s retail asset which includes Sunway Pyramid has contributed 57.4 per cent of total net property income to the REIT and has recorded double-digit rental growth at 97.5 per cent occupancy rate as at December 2013.

At the same time, the research firm said the REIT’s hotel business should benefit from Visit Malaysia Year 2014 due to better occupancy from higher tourist arrivals.

Meanwhile, the research arm of HwangDBS Investment Bank Bhd (HwangDBS Vickers Research) in a report said retail rents should remain strong with firm
demand for space at Sunway Pyramid which faced little competition for tenants in Bandar Sunway area.

It said Sunway Pyramid has managed to increase its retail sales in the second half of 2013 despite weaker consumer spending.

The research firm is optimistic that the REIT will perform well as Sunway Putra Place which is being refurbished will fetch higher rental yields once it opens next year.

HwangDBS Vickers Research said in the long term, Sunway REIT has sizable assets which include The Pinnacle, Sunway and Monash Universities, Sunway Velocity and Sunway Pyramid Phase Three. These assets can be injected into the REIT to provide good rental yields to support its NPI.

For the second quarter of financial year 2014 (2QFY14), Sunway REIT’s NPI grew 11 per cent year-on-year (y-o-y) to RM62.03 million compared with RM56.12 million in 2QFY13.

As for the first half of FY14 (1HFY14), the real estate investment trust’s NPI increased 8.6 per cent y-o-y to RM117.43 million compared with RM108.13 million in 1HFY13.

Sunway REIT’s income for 2QFY14 increased 4.25 per cent y-o-y to RM110.31 million from RM105.82 million in 2QFY13 while income for 1HFY14 rose 2.38 per cent to RM210.49 million compared with RM205.59 million in 1HFY13.

HwangDBS Vickers Research said the main revenue contributors were higher rental at Sunway Pyramid and full quarter contribution from the lease of Sunway Medical Centre (SMC).

The research firm observed that there was pick up in Sunway Resort Hotel’s occupancy rate to 84 per cent in 2QFY14 from 72 per cent in 2QFY13.

It said SMC’s net lease structure and improved NPI margin at Sunway Pyramid Shopping Mall has lifted the REIT’s overall margin.

The research firm believes that Sunway REIT’s robust yield of 6.5 per cent and strong portfolio of assets will sustain the NPI of the investment trust in the near future.