8 Things You Must Know About Sunway Real Estate Investment Trust Before Investing

Sunway Real Estate Investment Trust is presently the second largest REIT listed on Bursa Malaysia. Initiated with 8 properties, Sunway REIT has gradually enlarged its portfolio to 15 investment properties worth RM 6.69 billion as at 30 June 2017. In this article, I’ll share 8 quick facts that you need to know about Sunway Reit before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: SUNREIT / KLSE: 5176
Market Capitalization: RM 4.95 Billion (3 December 2017)

Share Price: RM 1.68 (3 December 2017)

Industry: Reit

Syariah Compliant: No

#2: The Business

Sunway Reit derives income from a diverse portfolio consisting of:

1. Retail Properties
   This includes Sunway Pyramid Shopping Mall, Sunway Carnival Shopping Mall, SunCity Ipoh Hypermarket, and Sunway Putra Mall. Collectively, the 4 properties are valued at RM 4.50 billion as at 30 June 2017. They have contributed RM 405.0 million and RM 289.9 million in gross revenues and net property income in 2017. Therefore, it is the largest income contributor to Sunway Reit.  
   
   
2. Hotel Properties
   This includes Sunway Resort Hotel & Spa, Sunway Pyramid Hotel, Sunway Hotel Seberang Jaya, Sunway Putra Hotel, and Sunway Hotel Georgetown. Collectively, the 5 properties are valued at RM 1.36 billion as at 30 June 2017. They have made RM 64.5 million and RM 60.6 million in gross revenues and net property income in 2017. Thus, it is the second largest income contributor to Sunway Reit.
   
   
3. Office Buildings
   This includes Menara Sunway, Sunway Tower, Sunway Putra Tower, and Wisma Sunway. Collectively, the 4 properties are valued at RM 472 million as at 30 June 2017. They have made RM 31.5 million and RM 16.5 million in gross revenues and net property income. Hence, it is the third largest income contributor to Sunway Reit.
   
   
4. Hospital
   Sunway Medical Centre is the only hospital building to be included in Sunway Reit’s portfolio. Acquired in December 2012, Sunway Reit leases the property back to Sunway Medical Centre Sdn Bhd under a 10-Year lease expiring on 31 December 2022. The property is valued at RM 336 million as at 30 June 2017. It has brought in net property income of RM 21.9 million to Sunway Reit, making it the fourth and the smallest income contributor to the group.

#3: The Financials

Sunway Real Estate Investment Trust has reported growth in gross revenues, net property income, and income available for distribution over the last 5 years. The growth was attributed to Sunway Reit’s continuous efforts in expanding its portfolio and undertaking asset enhancement initiatives during the period. As a result, this has contributed to growth in distribution per unit (DPU), up from 8.30 sen in 2013 to 9.19 sen in 2017.

Source: Annual Reports of Sunway Reit

Source: Annual Reports of Sunway Reit

#4: Recent Developments

Here, I’ll provide the recent developments of Sunway Reit according to its property segments:

1. Retail Properties
   The occupancy rate of Sunway Pyramid Shopping Mall, Sunway Carnival Shopping Mall, and Sunway Putra Mall are 98.8%, 95.1%, and 86.9% respectively at 30 September 2017. SunCity Ipoh Hypermarket is leased to a single tenant, Giant Hypermarket. This tenancy has been renewed for another 3 years until April 2020.
   
   
2. Hotels
   Sunway Reit has completed its refurbishment on Sunway Pyramid Hotel. It had recorded average occupancy rate of 71.0% as at 30 September 2017. Meanwhile, Sunway Resort Hotel & Spa, Sunway Putra Hotel, Sunway Hotel Seberang Jaya, and Sunway Georgetown Hotel have recorded average occupancy rate of 90.4%, 78.6%, 75.3%, and 93.3% respectively. Moving forward, Sunway Reit expects higher income from this segment as it expects to complete its acquisition of Sunway Clio Hotel for RM 340 million in Q3 2018.
   
   
3. Office Buildings
   Sunway Reit faces challenges in filling up spaces in Sunway Tower and Sunway Putra Tower. Both office buildings have low occupancy rates of 21.0% and 42.4% respectively as at 30 September 2017. The absence of sales from these two properties is offset by sales derived from Menara Sunway and Wisma Sunway which enjoyed occupancy rates of 95.1% and 83.6% respectively.
   
   
4. Industrial Property
   Sunway Reit has acquired Sunway Reit Industrial Shah Alam 1, its first industrial property located in Shah Alam for RM 91.5 million. It is leased to IDS Manufacturing Sdn Bhd under a long-term master lease agreements which expire on 31 December 2034. The rental is fixed at RM 5.6 million per annum and is subjected to review every 3 years. The next review date is fixed on 1 January 2019.

#5: Sponsor Strength

Sunway Bhd is the sponsor of Sunway Real Estate Investment Trust. It is a leading conglomerate with a market capitalization of RM 8.11 billion as at 22 October 2017. Please click on the link for more details.

#6: Valuation

As I write, Sunway Reit is trading at RM 1.68 a unit.

As at 30 September 2017, Sunway Reit has reported having RM 1.41 in net asset value a unit. Thus, its current P/NAV works out to be 1.19.

In Q1 2018, Sunway Reit has declared 2.67 sen in distribution per unit (DPU). If Sunway Reit is able to maintain its DPU at 2.67 sen for the next 4 quarters, it would pay out 10.68 sen in DPU. As such, its gross dividend yield is expected to be 6.36%. For individual investors, it is prudent to deduct 10% withholding tax from 10.68 sen when calculating your net dividend yield, as such, I would expect net dividend yield to be 5.72%.

#7: Investor Relations

For further inquiries or to request for additional investment information on Sunway Reit’s Investors Relation matters, you may contact:
Email:

irsunreit@sunway.com.my

Website:

http://www.sunwayreit.com/investor-relations/

#8: Major Shareholders

As at 28 July 2017, the substantial shareholders of Sunway Reit are:

– Sunway Reit Holdings Sdn Bhd: 37.34%

– Employees Provident Fund Board: 13.19%

– Amanah Saham Bumiputera: 7.24%

– Kumpulan Wang Persaraan (Diperbadankan): 4.17%

– Tan Sri Dato’ Seri Dr. Cheah Fook Ling: 4.00%

Note:

Tan Sri Dato’ Seri Dr. Cheah Fook Ling is ultimately the largest shareholder with 4.00% direct shareholdings and 37.34% indirect shareholdings in Sunway Reit. His daughter, Sarena Cheah Yean Tih is appointed as a non-independent non-executive director of Sunway Reit.

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