SUNREIT (5176) : Sunway REIT’s two assets to give relatively decent yields
Sunway REIT
(Dec 9, RM1.51)
Maintain “neutral” with a target price of RM1.55: Sunway Real Estate Investment Trust (REIT) has announced that it will be injecting two assets from its sponsor, Sunway Bhd.
These assets are Sunway Hotel Georgetown in Penang and Wisma Sunway Property in Shah Alam. The total consideration for these assets is RM134 million. Yields are relatively decent for the acquisitions, at about 6% for the hotel and 9% net for Wisma Sunway.
The acquisition of Sunway Hotel Georgetown is due to be completed in the third quarter of financial year 2015 (3QFY15) while Wisma Sunway is expected to be injected in 1QFY16. The differences in timing are mainly due to the different asset tenures. The acquisitions will be fully funded through debt. Post-acquisition, the management expects gearing to rise slightly to 33.5% from 32% currently, which we believe is still manageable.
Although yield accretive, the two assets only represent about 2.3% of the enlarged portfolio base of RM5.6 billion. We are more positive on the prospects for the hotel, given its location in the heart of the bustling George Town, stable occupancy of about 78%, and its competitive average room rate of between RM190 and RM200.
We are slightly wary of Wisma Sunway, given that: i) it is a strata-titled office, hence not fully owned by Sunway REIT; and ii) more than 90% of its existing tenants are made up of government tenants. That being said, its current rental rate of between RM3.50 per sq ft (psf) and RM3.60 psf is rather decent under the current environment.
Our FY15 to FY17 dividend per unit forecasts have been revised upwards by less than 5% after factoring in the contribution from the assets.
Our TP is now higher at RM1.55 from RM1.42, after revising some of our key valuation parameters in line with our house view. We reiterate that Sunway REIT’s potential rerating catalyst will be the injection of sizeable yield-accretive assets. — RHB Research, Dec 9
http://www.theedgemarkets.com
Sunway REIT
(Dec 9, RM1.51)
Maintain “neutral” with a target price of RM1.55: Sunway Real Estate Investment Trust (REIT) has announced that it will be injecting two assets from its sponsor, Sunway Bhd.
These assets are Sunway Hotel Georgetown in Penang and Wisma Sunway Property in Shah Alam. The total consideration for these assets is RM134 million. Yields are relatively decent for the acquisitions, at about 6% for the hotel and 9% net for Wisma Sunway.
The acquisition of Sunway Hotel Georgetown is due to be completed in the third quarter of financial year 2015 (3QFY15) while Wisma Sunway is expected to be injected in 1QFY16. The differences in timing are mainly due to the different asset tenures. The acquisitions will be fully funded through debt. Post-acquisition, the management expects gearing to rise slightly to 33.5% from 32% currently, which we believe is still manageable.
Although yield accretive, the two assets only represent about 2.3% of the enlarged portfolio base of RM5.6 billion. We are more positive on the prospects for the hotel, given its location in the heart of the bustling George Town, stable occupancy of about 78%, and its competitive average room rate of between RM190 and RM200.
We are slightly wary of Wisma Sunway, given that: i) it is a strata-titled office, hence not fully owned by Sunway REIT; and ii) more than 90% of its existing tenants are made up of government tenants. That being said, its current rental rate of between RM3.50 per sq ft (psf) and RM3.60 psf is rather decent under the current environment.
Our FY15 to FY17 dividend per unit forecasts have been revised upwards by less than 5% after factoring in the contribution from the assets.
Our TP is now higher at RM1.55 from RM1.42, after revising some of our key valuation parameters in line with our house view. We reiterate that Sunway REIT’s potential rerating catalyst will be the injection of sizeable yield-accretive assets. — RHB Research, Dec 9
http://www.theedgemarkets.com
