PETALING JAYA: The prospects for Sunway Real Estate Investment Trust
(REIT) appear bright, underpinned by its diverse property portfolio and active acquisition strategy.
With retail rental rates improving and hotel room rates on the uptrend, the Sunway-REIT is expected to see positive earnings growth through the year.
RHB Research raised its target price for Sunway-REITt to RM1.77 from the previous RM1.74 following some upward adjustments to its earnings forecasts for the REIT for the financial year ending Dec 31, 2024 (FY24) and FY25.
Maintaining its “buy” recommendation on the counter, the brokerage also introduced an earnings forecast of RM371mil for FY26.
“We believe Sunway-REIT’s diverse property portfolio and active acquisition strategy will be its key earnings driver,” RHB Research said.
“In the medium term, retail rental rates should be boosted following the ongoing asset enhancement initiative (AEI) in Sunway Pyramid and Sunway Carnival, as well as our expectation of hotel room rates remaining high as occupancy rates continue to improve,” it explained.
It noted that while REIT’s management had guided for a normalised mid-single digit rental reversion for its retail properties, there would likely be a boost to rental rates after the AEI is completed in Sunway Pyramid and Sunway Carnival between the fourth quarter of 2024 (4Q24) and 2Q25.
“Until then, the occupancy rate for Sunway Carnival may stay at the 80% to 85% range, but management is confident that it will recover to more than 90% after the AEI is completed,” RHB Research said.
“Year to date, the management has seen encouraging operational metrics with both footfall and retail sales higher year-on-year despite Sunway Pyramid seeing a slight drop in footfall y-o-y,” it added.
As for hotel room rates, RHB Research noted there was a positive trend.
“Hotel room occupancy rates are likely to trend upwards, driven by an improvement in tourist arrivals and business activities,” it said. As such, hotel room rates look set to stay at above pre-pandemic levels, with no pressure on hoteliers to lower room rates as of yet,” it added.
Meanwhile, with gearing at 43%, Sunway-REIT would likely need to fund future acquisitions via equity, according to RHB Research.
“The REIT should still be active in its acquisition activity as it has a RM14bil to RM15bil asset value target by 2027,” it said.
“Given the inorganic growth target, we reasonably expect future acquisitions to at least be partially funded via equity. Currently, the REIT is also in the midst of acquiring an industrial property in Prai, Penang, for RM67mil,” it added.
