1Q earnings growth lifts Sunway REIT



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KUALA LUMPUR (Nov 7): Sunway Real Estate Investment Trust (Sunway REIT) climbed 1.32% to RM1.53 for a two sen gain as at 9:44am, its intraday high today, boosted by first quarter earnings and revenue growth.

For comparison, the FBM KLCI rose 4.69 points or 0.3% to 1,836.37.

Yesterday, Sunway REIT said net profit rose 14.53% on year to RM63.45 million in its first financial quarter ended Sept 30, 2014 (1QFY14) from RM55.4 million a year earlier. Profit was lifted by higher net property income from the retail and hotel segments.

Revenue came in higher at RM113.81 million from RM100.18 million. Sunway REIT declared a first dividend of 2.28 sen a share.

Today, TA Securities Holdings Bhd maintained its “hold” rating on Sunway REIT shares with a higher target price of RM1.68.

This compares to RM1.57 previously, TA analyst Thiam Chiann Wenn said in a report today.

Thiam, however, downgraded TA's FY15 income forecast for Sunway REIT by 2.9% due to delay in the opening of Sunway Putra Mall and lower occupancy at Sunway Tower and Sunway Putra.

But higher net property income margin estimates have led TA to raise its FY16 forecast by 1.4%.

“The office segment would likely be the main drag to FY15 results, as Sunway Tower’s occupancy is expected to drop to 50% by end-Dec 2014 due to downsizing exercise by its  anchor tenant.

“Finding replacement tenant for Sunway Tower could be a difficult, in view of ample supply of office space in KLCC CBD (central business district) area.” Thiam said.

Thiam said TA had introduced its FY17 forecast for Sunway REIT with a projected earnings growth of 14%.

Similarly, Hong Leong Investment Bank Bhd analyst Low Yee Huap is maintaining its “hold” rating on Sunwa REIT with an unchanged target price of RM1.48.
Low said in a report today that Sunway REIT has the largest acquisition pipeline among Malaysian REITs.

He also said Sunway REIT had strong backing from its sponsor besides being well-diversified across various segments with low tenant concentration.

However, the REIT is still heavily reliant on Bandar Sunway, which will take time to change, according to Low.

He said this was compounded by persistent weakness in the office segment due to oversupply of new office space.