Affin Hwang maintains 'buy' on SunREIT, TP at RM2


  • Analyst Reports
  • Friday, 14 Feb 2020

KUALA LUMPUR: Affin Hwang Capital research maintained its buy call on Sunway REIT and recommended that investors stay invested following a decent set of results for the first half of FY20, which came within expectations.

Concomitantly, Sunway REIT management does not expects the coronavirus outbreak to have a material impact on its retail business for now, barring a prolonged or worsening of the outbreak.

There is a risk of a larger impact on the hotel business, prompting management to lower its room rates in a bid to improve occupancy.

"SREIT’s master lease agreements with the vendors should cushion its hotels’ earnings downside during this difficult time.

"We recommend that investors look beyond the possible near-term earnings blip

and stay invested," said Affin Hwang.

The research house has a target price of RM2 on the stock.

To recap its earnings announcement, Sunway REIT's 6MFY20 realised net profit grew 4.6% year-on-year to RM146mil owing to the maiden contribution from Sunway University & College Campus and a higher post-refurbishment contribution from Sunway Resort Hotel and Spa that offset weaker retail NPI.

The six-month result made up 50% and 47% of Affin Hwang's and consensus full-year estimates respectively.

On a quarter-on-quarter basis however, 2QFY20 core net profit fell 2.1% to RM72.1mil due to higher A&P and maintenance costs for Sunway Pyramid and Sunway Carnival mall, and lower revenue from Sunway Clio.
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