Interim results preview
- Expect 1HFY24 distributable income to drop c.12%
- Retail portfolio on the road to recovery, office negative rental reversions to remain
- New contribution from West 9 Zone Kids to underpin NPI growth, which should be more than offset by higher cash finance cost
Sunlight REIT will announce its 1HFY24 results on 27 Feb 2024. Despite c.5% growth in NPI, mainly led by a fresh contribution from West 9 Zone Kids, we forecast distributable income would fall by c.12% y-o-y, led by higher cash finance cost as a result of higher borrowings and HIBOR. Hence, interim DPU should drop by a larger c.13%.
Total revenue is expected to rise by c.5% y-o-y, mainly led by the fresh contribution from West 9 Zone Kids that was acquired in Apr 23. This is despite the lower contribution from the office portfolio, which should be dragged by negative rental reversions. Retail portfolio, excluding West 9 Zone Kids, should be on the road to recovery following the completion of asset enhancement work at Metro City Phase I. Net property income should rise by a similar c.5% with a stable cost-to-income ratio (FY22: 20.8%). However, this should be more than offset by higher finance cost, for which we forecast a rise of c.86% y-o-y.
Key things to watch for include office and retail portfolio occupancy, management’s outlook on office and retail rental reversions, loan refinancing progress, interest cost hedging, and acquisition plan, among others.