PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 26 Nov 2020, 11:22 AM


Sunway REIT - Steady Earnings Growth

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Sunway REIT’s (SREIT) 2QFY20 realised net profit came in at RM72.1m (+8.6% YoY, -2.1% QOQ) which was within our and consensus estimates. For 1H2020, the Group realized a net profit of RM145.9m (+4.6% YoY) which constituted c.48% and c.47% of our and consensus full year estimates. Group revenue rose by 11.7% YoY to RM155.8m in 2QFY20, boosted by new income contribution from the newly-acquired Sunway university and college campus, and improved performance across all business segments. Correspondingly, group net property income (NPI) increased by 11.9% YoY to RM116.6m. Earnings estimates are kept unchanged. Proposed distribution per unit rose by 8.9% to 2.45sen in 2Q FY2020. Maintain Neutral call and RM1.93 TP. Potential key catalysts are higher occupancy at SREIT hotels and new accretive acquisitions.

  • Resilient earnings from retail assets. Revenue from retail assets rose by 1.3% y-o-y to RM106.7m, largely contributed by Sunway Pyramid Shopping Mall and Sunway Putra Mall. Despite the growth in revenue, NPI contracted by 2.6% YoY to RM74.0m, on the back of lower advertising & promotion and maintenance expenses incurred in the corresponding period in the preceding year.
  • Hotel’s NPI up 32% YoY. The hotel segment recorded a revenue and NPI growth of 28.0% YoY and 32.0% YoY to RM22.6m and RM21.0m respectively due to the resumption of operation of the grand ballroom, meeting and function rooms in Sunway Resort Hotel & Spa upon the completion of refurbishment works. We believe that the upgraded and enhanced facilities are expected to attract higher demand for meetings, incentives, conferences and events (MICE) for the hotel. However, this was offset by softer performance from the hotels in Penang due to the overall soft market sentiment for the hospitality sector and intense competition.
  • Office segment remains challenging but SREIT managed to improve the overall occupancy rate in the office portfolio which saw office revenue improve accordingly by 10.7% YoY to RM10.4m with corresponding improvement in NPI by 6.1% YoY to RM5.5m.

Source: PublicInvest Research - 14 Feb 2020

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