Sunway REIT Earnings To Drop Even Further In Q4

May 21, 2020

Analysts expect Sunway Real Estate Investment Trust (Sunway REIT) to register much lower earnings in its fourth quarter as it feels the full impact of the Covid-19 outbreak and the extended Movement Control Order (MCO).

For the third quarter ended 31 March 2020, the REIT saw net property income drop 9% year-on-year to RM103.51 million. Revenue also fell 7.1% as the Covid-19 pandemic affected the trust’s hotel and retail segments, reported The Edge.

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“The MCO and Covid-19 impact is likely to be more severe in Q4 FY2020 given the extended MCO period in April to May. The Q3 FY2020 operational stats are already showing signs of weakness with the 11%-34% drop in retail and hotel revenue due to lower occupancy rates and cancellation of events/room bookings,” wrote CGS-CIMB in a note.

According to The Edge, CGS-CIMB kept its “hold” call on the REIT, with the target price unchanged at RM1.48. It expects net profit for FY2020 to stand at RM253 million, implying a 52% quarter-on-quarter fall in core net profit in Q4 FY2020.

MIDF Research, on the other hand, noted that the RM211.5 million core net income of the REIT for the nine-month period fell below its expectations at 71% of full-year forecast albeit within consensus’ full-year estimates at 77%.

MIDF slashed its earnings forecast for FY2020 by 9% and 11% for FY2021. It lowered its target price to RM1.88, while maintaining its “buy” call on the REIT.

“In view of the adverse impact Covid-19 has on Sunway REIT’s retail and hotel segment, we are revising our rental income assumption for the retail segment as well as occupancy rate and average daily rate for the hotel segment,” said MIDF.

On a positive note, MIDF said that the REIT’s management has revealed that footfall at its malls recovered to 40%-50% since the introduction of the conditional MCO as around 90% of its tenants have started to operate again.

“As for the hotel segment, we anticipate a slower recovery as Covid-19 is expected to change global travelling. As social gatherings are prohibited during the MCO, functions and corporate events have been cancelled, resulting in loss of income,” it said.


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