The trust’s retail segment is expected to gain from turnover rent and foreign tourists, while the revival of the tourism sector would buoy the hotel segment, said HLIB Research.
PETALING JAYA: Sunway Real Estate Investment Trust
(REIT) is expected to register another buoyant performance this year, after a robust result last year, underpinned by the continued recovery of its retail, hotel and office segments.
For the trust’s retail segment, performance would be supported by sustained turnover rent and higher foreign tourist arrivals, while its hotel segment would be boosted by the revival of the tourism sector with comfortable level of labour capacity should inbound tourists return to pre-pandemic level, Hong Leong Investment (HLIB) Research said, citing Sunway-REIT’s management.
As for the office segment, the trust would likely log positive rental reversion, which would be deemed commendable given the subdued office market, the brokerage noted.
HLIB Research raised its target price for Sunway-REIT to RM1.87 from RM1.67 previously, while maintaining its “buy” call on the counter.
The revised target price was based on higher earnings forecasts for the trust’s financial year ending Dec 31, 2023 (FY23) and FY24, and after the rolling forward of valuation year to FY24.
The target price is derived from FY24 dividend per unit on targeted yield of 5.3%.
“With tenancy sales exceeding pre-pandemic level, management reiterated that the retail performance is likely to remain buoyant in FY23 due to further upside arising from the arrival of international tourists,” HLIB said in its report following a recent briefing with Sunway-REIT’s management.
“Despite the general notion that ‘revenge spending’ is likely to dissipate this year, management thinks contribution from turnover rent will remain stable at high single digit of total rental income due to continuous effort in enhancing turnover rent mix in addition to the usual rental step up,” the research house added.
It said while tourist numbers were recovering in Malaysia, there was still a significant gap compared to pre-pandemic levels.
“This implied further upside for Sunway-REIT’s hotel segment arising from the eventual full revival of the tourism sector, especially from China.
“Management takes comfort in its labour capacity even if the tourists’ arrival returns to pre-pandemic level this year.
“There is also minimal increase in its labour costs vis-a-vis 2019,” HLIB Research said.
“Moreover, the impending full reopening of Sunway Resort Hotel in the first quarter of FY23 is expected to give another leg up to the hotel segment,” it added.
Meanwhile, Sunway-REIT’s office segment was expected to remain stable with low positive single-digit rental reversion for its properties in 2023, HLIB Research said, adding this was commendable due to intense competition.
