Period     3Q13 / 9M13

Actual vs. Expectations     9M13 realized net income (RNI) of RM163.3m came within expectations, making up 77% each of street and our estimates. Note that SUNREIT has completed its placement (Feb-13) and acquisition of Sunway Medical Centre (Dec-12).

Dividends    GDPU amounted to 2.06 sen for the quarter, although payout will only be 1.09 sen (non-taxable portion of 0.07 sen) (refer overleaf).

Key Results Highlights     YoY, NPI grew 7% to RM79.7m. Besides the new full quarter’s contribution from Sunway Medical Center (SMC), it saw positive rental reversions of 18.5% on 28% of the portfolio’s NLA which was largely led by Sunway Carnival Mall and Sunway Pyramid Mall. This helped offset the lower contributions from Sunway Putra Mall. Hotels NPI improved by 7%, which helped offset the 10% decline in the office NPI. Finance cost reduced by 15% on the back of refinancing efforts, which lowered average cost of debt to 3.7% from 4.6%. Hence, RNI grew by 16% to RM55.2m.

QoQ, RNI slid marginally by 2% as; 1) expenses increased by 10%arising from the acquisition of SMC; 2) finance cost rose by 12% also due to the acquisition of SMC and amortisation of loan expenses on its RM410m CPs. Additionally, RNI was dragged down by lower NPIs from the hotels (-2%) and offices (-8%).

Outlook     SUNREIT is eyeing third party acquisitions and its parent’s matured assets. Sunway Putra Mall’s major AEIs amounting to c. RM300m will be commencing soon. We also look forward to major rental reversions from Sunway Pyramid and Sunway Carnival Mall in FY14. (Refer overleaf).

Change to Forecasts     No changes to FY13-14E gross dividend yields of 5.0%-5.1%.

Rating     UNDER REVIEW

Valuation    Our CALL and TP are now under reviewed, as we may reposition our stock/sector calls post GE’s outcome. Our previous CALL and TP were MARKET PERFORM and RM1.61, respectively.

Risks      Retail sector risks. Downside risks from sector de-rating if investors switch to higher beta developers. Upside risks if political uncertainties persist.

Source: Kenanga