KUALA LUMPUR: Analysts are positive on Sunway Real Estate Investment Trust
’s (Sunway REIT) acquisition of Kluang Mall located in Kluang, Johor for RM158mil.
“We view the asset acquisition positively as it will allow Sunway REIT to expand its retail asset footprint to central of Johor which is a state with an improving property outlook,” MIDF Research said.
The research house said that with a strong track record in retail management, Sunway REIT is confident in boosting the mall's performance through tenancy optimization, proactive management, and asset enhancement initiatives.
MIDF noted that the acquisition yield is attractive with a net property yield of 6.8%.
“Hence, the acquisition is expected to be earnings accretive to Sunway REIT. Besides, the purchase consideration of RM158mil is lower than the market value of RM165mil,” it said.
It anticipates a marginal impact on Sunway REIT's balance sheet from the acquisition, with gearing expected to rise marginally to 0.42x from 0.41x in 1QFY24.
“We remain positive on Sunway REIT as we see stable contribution from its retail division on the back of positive rental reversion and high shopper footfall. Besides, the outlook for its hotel division is also improving with expectation of higher tourist arrivals. Hence, we maintain our BUY call on Sunway REIT. Meanwhile, distribution yield is attractive, estimated at 5.5%,” MIDF said.
It maintained its “buy” call on Sunway REIT with a revised target price of RM1.81 from RM1.80 previously.
Meanwhile, TA Securities is also positive on the proposed acquisition due to the asset's strategic location, attractive pricing, and the potential for increased net property income (NPI) through optimising the tenant mix and implementing asset enhancement initiatives.
“Assuming the property starts contributing to Sunway REIT's earnings in 1Q25, the proposed acquisition is expected to boost our FY25 and FY26 earnings forecasts by approximately 2%. However, we will maintain our current earnings forecasts until the acquisition is finalised,” it added.
TA has maintained its “buy” on Sunway REIT with a higher target price of RM1.93 from RM1.88 previously based on an unchanged target yield of 6.0%.
