KUALA LUMPUR (May 16): Sunway Real Estate Investment Trust (KL:SUNREIT), which manages a diversified portfolio ranging from malls, hypermarkets to offices, said its net property income (NPI) fell 5.6% year-on-year to RM130.54 million for the first quarter ended March 31, 2024 (1QFY2024).

Quarterly revenue slipped 2.3% to RM178.59 million compared to a year ago, while its net profit for the three months ended March 31, 2024 was RM86.98 million, down 10% from RM96.46 million in the previous year’s corresponding period, it said in an exchange filing.

Sunway REIT attributed the drop in NPI to lower contribution from its service division after the cessation of rental income from Sunway Medical Centre that was sold in 3QFY2023.

However, earnings contraction in the service division was cushioned by improved performance from its hotel, office and industrial and other segments, the trust said in the statement.

Furthermore, its chief executive officer Clement Chen commented that the six newly acquired hypermarkets are expected to bring in more than enough rental income to fill the void in earnings caused by the divestment of Sunway Medical Centre (Towers A & B).

The initial yield of the hypermarkets is at 8%, based on the purchase consideration, according to Chen.

He noted that the purchase of the hypermarkets, which was completed in April, has augmented Sunway REIT’s asset portfolio to 25 properties and its assets under management to RM9.5 billion.

Sunway REIT said it is “confident” that Malaysia's domestic consumption will be supported by low unemployment and reasonable economic growth, and is hopeful that stronger tourist arrivals will provide another boost to the local economy.

Further, impact from the implementation of the high value goods tax and an increase in sales and service tax to 8% from 6% is expected to be minimal, Sunway REIT noted.

NPI at its retail segment dropped 3% to RM86.9 million in 1QFY2024, largely due to higher marketing cost (including festive decoration at its flagship Sunway Pyramid Mall) as well as allowance for doubtful debts.

“The prospect for this segment in upcoming quarters will be boosted by the completion of the acquisition of six hypermarkets” at the end of April, it said.

NPI from its hotels, meanwhile, rose 3% to RM18.1 million thanks to higher tourist arrivals, while that of its offices was up 3% to RM13.9 million amid stable average occupancy rate of more than 80%.

At its services division, NPI dropped 40% primarily due to the disposal of the Sunway Medical Centre, which was completed on August 30, 2023, though rental contribution from its Sunway university and college campus increased by 2.3% via annual rental reversion.

The industrial segment, meanwhile, reported a 48% surge in NPI to RM2 million due to rental contribution from a new tenant, occupying 27% of net lettable area at Sunway REIT Industrial – Petaling Jaya 1. Sunway REIT is in the “advanced” stage of negotiations with prospective tenants for the remaining space, it added.