SUNREIT (5176) : Sunway REIT - Mixing business with pleasure
Target RM1.53 (Stock Rating: HOLD)
Sunway REIT's acquisition of two properties, a hotel in Penang and an office tower in Shah Alam for a total price of RM134m, is positive as it maintains its one-property-per-calendar-year plan. However, note that the acquisition will likely only boost its earnings by 1-2%. Earnings contribution will only be seen by 2HCY15, when the acquisitions are completed. We make no changes to our earnings forecasts while our DDM-based target price is maintained at RM1.53. We retain our Hold call on the stock. For exposure to M-REITs, we prefer Axis REIT.
What Happened
Sunway REIT has announced that it is acquiring two properties, a hotel in Penang and an office tower in Shah Alam, for a total purchase consideration of RM134m. Both properties will be acquired from Sunway Bhd's (Sunway REIT's majority shareholder) subsidiaries. The hotel, Sunway Hotel Georgetown, is a 4-star 25o-room hotel located in Georgetown, Penang, and will cost RM74m. The hotel will be leased back to the vendor, Sunway Biz Hotel (SBH), post the acquisition, with guaranteed rent for Sunway REIT amounting to RM4.4m p.a. for the first 2 years and RM3.3m p.a. for the following 8 years. The office, Wisma Sunway Property, is a stratified 19-storey office building located in Shah Alam and will cost a total of RM60m. The property enjoys a captive office market as more than 90% of its tenants are government agencies. Both properties are valued at the purchase price by independent valuers, Knight Frank Malaysia.
What We Think
We are positive on the acquisitions as they will provide an income boost for Sunway REIT, although we note that the impact is minimal, accounting for 1-2% of total revenues and 2.4% of total existing assets. Nonetheless, it is a positive development given that Sunway REIT is keeping to its plan of acquiring assets every calendar year after failing to do so in 2013. The acquisition is expected to be completed by 1QCY15 and 3QCY15 for the hotel and office, respectively. We make no changes to our forecasts pending more details on the properties.
What You Should Do
While it is positive that Sunway REIT has injected assets, the small size of the acquisition does not really give a huge boost to earnings. We maintain our Hold call on the stock, with an unchanged target price of RM1.53.
Source: CIMB Daybreak - 09 December 2014
Target RM1.53 (Stock Rating: HOLD)
Sunway REIT's acquisition of two properties, a hotel in Penang and an office tower in Shah Alam for a total price of RM134m, is positive as it maintains its one-property-per-calendar-year plan. However, note that the acquisition will likely only boost its earnings by 1-2%. Earnings contribution will only be seen by 2HCY15, when the acquisitions are completed. We make no changes to our earnings forecasts while our DDM-based target price is maintained at RM1.53. We retain our Hold call on the stock. For exposure to M-REITs, we prefer Axis REIT.
What Happened
Sunway REIT has announced that it is acquiring two properties, a hotel in Penang and an office tower in Shah Alam, for a total purchase consideration of RM134m. Both properties will be acquired from Sunway Bhd's (Sunway REIT's majority shareholder) subsidiaries. The hotel, Sunway Hotel Georgetown, is a 4-star 25o-room hotel located in Georgetown, Penang, and will cost RM74m. The hotel will be leased back to the vendor, Sunway Biz Hotel (SBH), post the acquisition, with guaranteed rent for Sunway REIT amounting to RM4.4m p.a. for the first 2 years and RM3.3m p.a. for the following 8 years. The office, Wisma Sunway Property, is a stratified 19-storey office building located in Shah Alam and will cost a total of RM60m. The property enjoys a captive office market as more than 90% of its tenants are government agencies. Both properties are valued at the purchase price by independent valuers, Knight Frank Malaysia.
What We Think
We are positive on the acquisitions as they will provide an income boost for Sunway REIT, although we note that the impact is minimal, accounting for 1-2% of total revenues and 2.4% of total existing assets. Nonetheless, it is a positive development given that Sunway REIT is keeping to its plan of acquiring assets every calendar year after failing to do so in 2013. The acquisition is expected to be completed by 1QCY15 and 3QCY15 for the hotel and office, respectively. We make no changes to our forecasts pending more details on the properties.
What You Should Do
While it is positive that Sunway REIT has injected assets, the small size of the acquisition does not really give a huge boost to earnings. We maintain our Hold call on the stock, with an unchanged target price of RM1.53.
Source: CIMB Daybreak - 09 December 2014
