Sunway Real Estate Investment Trust (SUNREIT) has a distinctive portfolio and is one of the largest diversified REITs in Malaysia with assets that arSREITe strategically located. We expect SUNREIT’s earnings to rebound strongly with the reopening of economy. 1HFY22 quarterly report saw a huge jump in distributable income where it improved by 153% YoY. We believe SUNREIT will continue to grow as most of the assets are operating at full capacity. We expect SUNREIT to register distributable income of RM311m and RM336m for FY22 and FY23 respectively. Based on a 95% payout ratio, we expect SUNREIT to distribute 8.6sen and 9.3sen per share for FY22-FY23, translating into yields of 6.0% and 6.5% respectively. BUY with a target price of RM1.70 based on a target yield of 5.5% over FY23 distribution.

SUNREIT’s key assets located in Sunway City are Sunway Pyramid Shopping Mall, Sunway Resort, Sunway Pyramid Hotel, Sunway Clio Property, Menara Sunway, Sunway Medical Centre (Tower A & B) and Sunway university & college campus.

The success of Sunway City is replicated in Sunway City Ipoh, Perak; the first integrated township in Southeast Asia with five FIABCI accolades, where SunCity Ipoh Hypermarket is located. On the mainland of Penang, Sunway REIT owns Sunway Carnival Shopping Mall and Sunway Hotel Seberang Jaya. In FY2015, Sunway REIT added two assets into the portfolio, namely Wisma Sunway in Shah Alam and Sunway Hotel Georgetown.

Sunway REIT owns four properties in Kuala Lumpur, namely, Sunway Tower, Sunway Putra, consisting of Sunway Putra Mall, Sunway Putra Hotel and Sunway Putra Tower. In the Industrial & Others segment, Sunway REIT owns Sunway REIT Industrial – Shah Alam 1 in Section 23, Shah Alam which is a prime industrial hub, that is predominantly occupied by established multinational logistics and manufacturing companies.

All retail assets have achieved occupancy rate of more than 95% as at 1HFY22. The outlook for retail segment remains positive, underpinned by strong improvement in retail footfall and retail sales which have recovered to pre-pandemic level. The outlook is further supported by healthy economic growth, sustained domestic consumption, gradual pick up in international travelling and new income contribution from the new wing of Sunway Carnival Mall following its launch in June 2022.

Occupancy rates for the hotel segment is gradually improving in 2H2022, predominantly supported by domestic leisure, corporate, Meetings, Incentives, Conferences and Exhibitions (MICE) and the reopening of international border.

Source: Rakuten Research - 15 Sept 2022