KUALA LUMPUR: There is an improved outlook on Sunway Real Estate Investment Trust (SunREIT) for the fourth quarter of this year as shopper traffic could be boosted by the reopening of the economy coupled with the holiday season and hotel occupancy rates are forecast to improve.

       In line with this, Kenanga Research said it expects gradual earning improvements in the coming quarters, driven mainly by the retail segment.

       However, it cautioned that management does not discount the possibility of further rental rebates in the coming months.

       For the five quarters to Sept 30 so far, Kenanga noted that realised net income came to RM154.3mil, which was slightly above its expectation at 87% but below consensus at 66%.

       Take note that SunREIT's FY21 financial year comprises six earnings quarters given its change of financial year-end to December from June.

       For FY21, Kenanga increased its realised net income forecast by 5% to RM187mil on lower-than-expected rental rebates. It maintained its FY22 core net profit forecast of RM271mil.

       "We believe FY22E RNI should remain intact for now assuming the current trajectory of economic recovery maintains with gradually improving rental rates and reversions in FY22," it said in a note.

       Kenanga kept its "market perform" recommendation on SunREIT and target price of RM1.35.

       Meanwhile, Maybank Investment Bank Research said it also expects improvement in SunREIT's business performance for the sixth quarter of the 2021 financial year.

       "Retail malls are expected to gradually recover, due to the easing of movement restrictions and resumption in business operations.

       "Retail footfall is showing encouraging signs, recovering to 60%-80% of pre-Covid levels in Sept and Oct.

       "Rental reversion, however, continues to be negative (estimated single-digit decline YoY)," it said in a note.

       It added that the hotel segment is expected to remain weak due to international border restrictions although partially helped by an improved outlook on domestic tourism.

       The research firm anticipates downside earnings risks from Sunway Resort Hotel, Sunway Pyramid Hotel and Sunway Hotel Seberang Jaya due to their new master lease agreements since July 2020.

       While SunREIT's 15 months core earnings disappointed at 77% of Maybank IB's 18-month forecast, it maintained its forecasts due to expected improvement in the sixth quarter of the financial year.

       "We maintain earnings, 'sell' call and DDM-TP of MYR1.30," it said.