Investment Highlights

• We maintain our HOLD recommendation on Sunway REIT (SREIT) with an unchanged fair value of RM1.68 based on FY19 target yield of 6%. We keep our FY19-20F numbers unchanged at RM296.9mil and RM310.2mil respectively. We introduce our FY21F earnings forecast at RM323.3mil.

• SREIT recorded its 4QFY18 revenue of RM136.3mil (+2.8% YoY and -3.7% QoQ) bringing the full-year FY18 revenue to RM560.4mil (+7.2%), underpinned by retail segment and new income contribution from newly completed acquisitions, namely Sunway REIT Industrial, Shah Alam 1 and Sunway Clio Property. Correspondingly, full-year NPI grew by 4.8% to RM419.9mil.

• SREIT’s full-year FY18 distributable income came at RM281.9mil (+4.2% YoY), well within both our and consensus estimates. Meanwhile 4QFY18 distributable income of RM63.3mil is 5.2% lower YoY (-9.4% QoQ). SREIT recommended a DPU of 2.15 sen as compared to 2.27 sen in 4QFY17.

• The retail segment reported its full-year revenue and NPI of RM416.5mil (+2.8% YoY) and RM296.9mil (+2.4% YoY) respectively on the resilient performance of Sunway Pyramid Shopping Mall and Sunway Carnival as well as Sunway Putra Mall. Sunway Pyramid Shopping Mall’s revenue and NPI grew by +3.5% and 3.6% to RM314.3mil RM237.9mil respectively driven by higher average net rent per sq ft. Occupancy rates at Sunway Pyramid, Carnival and Putra Mall remained stable at 98.9%, 97.3% and 90.7% respectively (vs. 98.0%, 97.6% and 90.7% in FY17).

• The hotel sector’s full-year revenue and NPI improved by 28.1% and 28.2% to RM82.6mil and RM77.7mil respectively, due to higher contribution from Sunway Pyramid Hotel as the average occupancy rate rebounded to 71.4% in FY18 versus 56.8% in FY17 on the back of the completion of its refurbishment. Meanwhile Sunway Resort Hotel & Spa has recorded softer average occupancy rate of 73.5% in FY2018 versus 81.5% in FY2017, mainly attributable to softer market demand from the Middle Eastern market and leisure market.

• The office sector’s full-year revenue and NPI expanded by 6.3% and 6.1% to RM33.5mil and 17.5mil respectively, on the back of gradual improvement in average occupancy rates for Menara Sunway and Sunway Putra Tower.

Source: AmInvest Research - 10 Aug 2018