• Site visit to Sunway Velocity Mall in Cheras

• High occupancy rates despite oversupply concerns

• Velocity Hotel and Velocity Medical Centre under construction

• Maintain NEUTRAL with an unchanged TP of RM3.25

Site visit to Sunway Velocity Mall in Cheras. We had a site visit to Sunway Velocity Mall in Cheras recently following the opening of the mall on 8th December 2016. Sunway Velocity Mall is part of Sunway Velocity project that spanned across 23 acres of land in Cheras. Sunway Velocity is a vibrant integrated development, which comprises office and retail projects, residential projects, Sunway Velocity Hotel, and Sunway Velocity Medical Centre. Sunway Velocity is located 4km away from KL City Centre and with direct link to two upcoming underground MRT stations.

High occupancy rates despite oversupply concerns. Sunway Velocity Mall is having net lettable area (NLA) of 880k square feet while secured occupancy rate stood at 90%. We gather that anchor and mini anchor tenants of the mall include Parkson, TGV, AEON Max Value, Grand Imperial, and Harvey Norman. We were pleasantly surprise by the high occupancy rate of the mall given concerns about oversupply of retail spaces in Cheras where the upcoming MyTOWN Shopping Centre with NLA of 1.1m square feet is 1.5km away from Sunway Velocity. We believe Sunway Velocity Mall should continue enjoy high occupancy rates going forward given the expertise of Sunway Berhad in managing shopping malls and good connectivity of Sunway Velocity.

Velocity Hotel and Velocity Medical Centre under construction. On other projects in Sunway Velocity, we gather that Sunway Velocity Hotel, which is a 4-star business hotel, is under construction and due for opening by 2H2017. On the other hand, Sunway Velocity Medical Centre with 240 beds is currently under construction with targeted opening in 4Q2018.

Maintain Neutral with an unchanged TP of RM3.25. We maintain our earnings forecast for FY16-17 as we had already inputted the earnings contribution from Sunway Velocity mall to our earnings forecast. We also maintain our TP for Sunway at RM3.25, based on Sum-of-Parts valuation. We are keeping our Neutral stance on Sunway due to overall subdued property market outlook.

Source: MIDF Research - 20 Dec 2016