Sunnier outlook starting 1QFY22
? 1QFY22 results were above expectations; core net profit surged 116% yoy.
? Retail malls’ performance returned to pre-pandemic levels, with marginally
positive rental reversions; hotel segment’s further recovery will be gradual.
? Retain Hold rating with higher TP (FY22-24F dividend yields of 4.4-5.1%).
1QFY22 results above expectations; core net profit up 116%yoy
SunREIT’s 1QFY22 core net profit made up 33-36% of our and consensus forecasts. The
results w ere above our expectations on account of : 1) stronger-than-expected revenue at
30% of our full-year estimate, driven mainly by retail malls and strong car park income, and
2) higher NPI margin of 77% vs. our full-year forecast of 73.2%. Overall 1QFY22
performance w as driven by 1) full economic reopening, 2) pent-up travel demand during
the Chinese New Year period, 3) recovery in retail footfall and tenant sales to pre-pandemic
levels, and 4) minimal rental assistance. The improvements in operating conditions w ere
reflected in 1QFY22’s 48% yoy grow th in revenue (-2.4% qoq). Overall core net profit of
RM85.9m (excluding RM18.2m FV gain on the revaluation of a new ly acquired asset)
climbed 116% yoy (+16.9% qoq). No dividends w ere declared 1QFY22, as expected, due
to semi-annual payments in 2Q and 4Q.
Retail malls back to pre-Covid levels; hotels recovering gradually
The key outperformer in 1QFY22 w as the retail segment, underpinned by recovery
momentum carried through from the Oct-Dec 2021 period. SunREIT indicated during the
results conference call that both retail footfall and tenants w ere back to pre-pandemic levels
– particularly for Sunw ay Pyramid Mall (positive rental reversion in 1QFY22). In 1QFY22,
the retail segment’s revenue surged 84% yoy w ith minimal rental assistance provided.
Overall rental reversion in 1QFY22 w as marginally positive. The group remains cautiously
optimistic on the continued recovery of the hotel segment and expects the resumption of
Sunw ay Resort Hotel’s first phase of operations in May to be supportive of this. Hotel
occupancy rates stood at 42-45% in 1QFY22 and are expected to gradually increase w ith
the reopening of international borders. Separately, the RM436m extension of Sunw ay
Carnival Mall in Seberang Jaya is on track for completion and opening by 2QFY22.
Reiterate Hold rating with a higher RM1.53 TP
We raise FY22F EPS/DPU by 7.7% as w e impute stronger revenue for the retail segment.
The increases in our FY23-24F EPS/DPU are marginal due to housekeeping. We retain
our Hold rating, supported by FY22-24F dividend yields of 4.4-5.1%. Due to the higher
DPU in FY22F and a low er adjusted beta, our DDM-based TP rises to RM1.53 (COE:
6.3%). Upside risks: new asset acquisition opportunities and turnarounds in the retail and
hotel sectors; dow nside risk: w eaker earnings. Separately, in 1QFY22, the group acquired
an asset in Port Klang (Selangor) for RM34.1m. This w ill be redeveloped over the next 2-
3 years into a seafront tourist destination w ith F&B, retail and leisure offerings.