Maintain HOLD
1QFY22 results were above expectations at 31% of our and consensus’ full
year forecasts. YoY earnings growth was attributed to improvement across
most assets, particularly retail and hospitality. Our FY22/23E earnings
forecasts are tweaked by +7%/3% and our DDM-TP is marginally increased
to MYR1.46 (from MYR1.45). Maintain HOLD.
Improvements at key assets
Excluding unrealised fair value gain of investment properties of
MYR18.3m, 1QFY22 core earnings was MYR83.1m (+161% YoY, +23% QoQ),
31% of our/consensus’ full-year estimates. 1QFY22’s YoY net profit growth
was driven by (i) improvement in Sunway Pyramid’s net property income
from sustained occupancy rate and positive rental reversion, and marginal
rental support, (ii) improved overall occupancy at hotel properties with
the increased domestic leisure and business travels, (iii) positive rental
reversion at Sunway Medical Centre, Sunway University & College campus
and Sunway REIT Industrial – Shah Alam 1, and (iv) lower interest costs due
to lower average interest rate. Similarly, QoQ core net profit growth was
due to improvement at key retail and hospitality assets.
Adjust higher FY22/23E earnings
We tweak FY22/23E earnings by 7%/3% after adjusting for operating
expenses estimates. Near-term growth is largely attributed to sustained
occupancy and rental rates, as well as positive rental reversions.
Sustainable recovery at retail and hospitality assets
SunREIT’s malls and its’ wider retail and hospitality assets are expected to
deliver a sustained recovery, underpinned by lower rental rebates,
improvements in domestic tourism, and pick up in international leisure
and business travel. Meanwhile, new income contribution from Sunway
Carnival Mall (new wing) which is expected to complete in 2QFY22 and the
phased re-opening of Sunway Resort Hotel from May 2022, will also
contribute positively to the performance of the retail and hotel segment.