PETALING JAYA: Sunway Real Estate Investment Trust (SunREIT) will likely see further improvement in its earnings for the three months to December 2021 (fourth quarter or Q4 of 2021), driven by the expected recovery in its retail and hotel segments.
According to analysts, the reopening of Malaysia’s economy and the holiday season could boost retail sentiment and domestic travel, which in turn, would benefit SunREIT in the form of higher footfall to its shopping malls and occupancy rates for its hotels.
In its report, Kenanga Research yesterday said it expected gradual earnings improvements for SunREIT in coming quarters, especially from the main driver, namely, the retail segment with the recent reopening of the economy and upcoming holiday season.
“The outlook for Q4 is expected to be better in light of the reopening of the economy boosting shopper traffic, and the holiday season, which would promote spending and domestic travel allowing for better hotel occupancy rates,” the brokerage said.
However, it noted, SunREIT did not discount the possibility of further rental rebates in the coming months.
Kenanga Research said the fund’s office and services segments were expected to remain stable. It has projected SunREIT’s realised net income to grow 5% for the financial period ending Dec 31, 2021 (FP21) to RM187mil on lower-than-expected rental rebates.
The research firm has maintained its “market perform” call on SunREIT, with an unchanged target price of RM1.35.
SunREIT’s net property income (NPI) increased 3.6% for Q5 of FP21 from RM68.1mil in Q1 of FP21 on lower property operating expenses.
For Q5 of FP21, SunREIT reported gross revenue of RM106.9mil, compared with RM107.4mil in Q1 of FP21.
Meanwhile, CGS-CIMB Research was similarly optimistic about the outlook in Q4 of 2021 for SunREIT’s retail malls and hotels.
“Having observed notable improvements in retail sentiment and domestic travel since October (retail mall weekend footfall at 60%-80% vs pre-pandemic levels and increased hotel bookings), the group’s strategy over the next few months would be to capture the market recovery in Q4 of 2021 by ramping up promotions, focusing on retail tenant retention, and improving hotel occupancy rates in line with year-end festivities,” it said.
“Nevertheless, rental assistance will continue, albeit on a selective basis, and rental reversion should remain in the lower single-digit negative region,” it noted.
CGS-CIMB Research has retained its “hold” rating on SunREIT, with a higher dividend-discount-model-based target price of RM1.53, compared with RM1.38 previously.
It noted that the counter still offered decent dividend yields of 4.3% to 4.8% for the financial year ending Dec 31, 2021 (FY21) to FY23, and this should support the share price.