Thursday August 9, 2012
Sunway REIT in acquisition mode
By Leong Hung Yee
PETALING JAYA: Sunway REIT Management Sdn Bhd, which manages the Sunway Real Estate Investment Trust (SunREIT), is in talks with its sponsor Sunway Bhd to acquire some properties from the latter to be injected into SunREIT.
“Sunway REIT will actively seek acquisition opportunities in this financial year ending June 30, 2013 (FY13),” CEO Datuk Jeffrey Ng Tiong Lip said at a financial results briefing.
As at June 30, SunREIT had total assets valued at RM4.63bil with 11 properties. Of the 11 properties in its portfolio, four are retail assets, four hotels and three offices.
Chief financial officer Wai Sow Fun said Sunway REIT was just “studying” the acquisition from its sponsor and nothing had been decided at the moment.
She said the properties would be injected into SunREIT “at the right time” depending on the right pricing.
“We are looking at retail and mixed-used assets. There's no fix numbers (of property),” Wai said when asked on how many properties Sunway REIT was looking to acquire.
On the location of these properties, Wai said they would be in key growth cities such as Klang Valley, Penang, Johor and Sabah.
Investor relations manager Crystal Teh said some of the properties it was looking at included two universities, namely Sunway University and Monash University, Sunway Campus, Sunway Giza Shopping Mall and Sunway Medical Centre.
Additionally, Teh said its sponsor also had properties under assets such as The Pinnacle, Sunway Pyramid 3 and Sunway Velocity.
She said SunREIT's total portfolio would hit RM7bil in five to seven years from its initial public offering. SunREIT was listed in July 2010.
Teh also pointed out that the company was conducting an ongoing assets enhancement initiatives.
Meanwhile, Ng said Sunway REIT would continue with its capital management programme to take advantage of the current low interest rate environment.
He said the capital management programme allowed the company to to optimise the cost of capital as well as managing risks.
“The prevailing low interest rate environment offers opportunities for potential interest savings and lowering of overall cost of debt,” he said, adding that it managed to lower its cost of debt to 3.73% in FY12 from 4.65% in FY11.
Ng said its ratio of floating rate borrowings was at 80% currently as it wanted to tap the low interest rate. However, he said it would be issuing some RM1bil unrated medium-term notes programme, going forward.
Wai said the first tranche of the RM1bil would be RM400mil, which would be issued within the next six months.
SunREIT's net property income (NPI) rose 22.6% year-on-year to RM299.19mil in FY12 from RM244.01mil a year ago, contributed by Sunway Putra Place and strong business performance from retail and hotel segments.
It recorded a 13.9% increase in net income realised to RM190.58mil against RM167.31mil. Its income distribution declared stood at RM201.97mil, 14.4% higher than the RM176.57mil in FY11.
SunREIT also declared distribution per unit (DPU) of 7.5 sen for FY12, representing an increase of 14% year-on-year.
Ng said Sunway REIT was committed to distribute 100% of its distributable net income for the current financial year (FY13).
In a report, CIMB Research said SunREIT's FY12 core earnings were broadly within expectations but surprisingly high margins enabled it to edge 3% past its forecast and 2% past consensus numbers. “The 20% retail sales growth at Sunway Pyramid mall was impressive,” it said.
“We raise earnings per share and DPU after increasing margin assumptions.
“This leads to a higher dividend discount model-based target price.
“We reiterate our outperform rating. The stock could enjoy a re-rating in the event of higher-than-expected rental reversions for Sunway Pyramid when 63% of its net lettable area expires next September.”