Sunway REIT's (SREIT) 3QFY24 realised net profit came in at RM89.1m (+2.5% YoY, +14.2 QoQ), largely within our full-year estimates but a tad below consensus. In 9MFY24, the realised profits constitute about 73% and 70% of our and consensus full year estimates. The Group's net property income (NPI) rose 5.5% YoY to RM144.3m in 3QFY24, bringing YTD NPI to RM404.2m, primarily driven by robust performance from retail and hotel segments, along with resilient performance from the other segments. We adjust our FY25-27 upwards by 7%/9% to account for the new assets' contributions which increased total assets' value from about RM9bn to RM10bn. As such, we nudge our TP upwards to 1.80 (from RM1.55 previously), or pricing it at about 5% dividend yield. Given the limited share price upside, we maintain our Neutral call.

• Retail revenue rose 17% YoY in 3QFY24 to RM130.6m, primarily attributed to the full quarter rental contributions from the six hypermarkets, which saw deal completion on 30 April 2024. As such, the Retail segment's NPI rose 12% YoY to RM91.8m. We believe that Group Retail segment's positive trajectory is expected to continue in the coming quarters, supported by the opening of the new Oasis wing at Sunway Pyramid Mall on November 2024 and the new rental contribution from Sunway 163 Mall commencing on October 2024.
• Hotel segment's revenue rose 5% YoY to RM29.2m in 3QFY24, supported by an improved occupancy rate of 65% YTD 9MFY24 compared to 63% in the similar period last year. We understand that the positive trend was largely driven by a notable increase in foreign tourist arrivals across all hotels, particularly at its properties in Penang and Kuala Lumpur, including Sunway Hotel Seberang Jaya, Sunway Hotel Georgetown and Sunway Putra Hotel, which have all achieved pre-pandemic levels of foreign tourist arrivals.
• Office segment's revenue remained flattish with only 1% growth YoY in 3QFY24 to RM12.9m in 3QFY24 with revenue dropped slightly from RM20.7m to RM20.5m in 3QFY24. The performance of the segment was underpinned by a stable occupancy rate of more than 80% achieved YTD. Elsewhere, the services segment registered revenue and NPI of RM9.6m for 3QFY24, or a drop of 30% YOY, primarily attributed to the disposal of Sunway Medical Centre (Tower A & B), which was completed on 30 August 2023. On the other hand, the rental contribution for Sunway university & college campus increased by 2.3% subsequent to an annual rental reversion, in accordance with the master lease agreement.

Source: PublicInvest Research - 15 Nov 2024