Sunway Reit 1HFY22 earnings were within expectations says MIDF, core net earnings of RM162.6m came in within expectations, making up 52% and 54% of consensus full-year estimates respectively.
Meanwhile, a distribution per unit (DPU) of 4.22 was announced for 1HFY22. Sequentially, 2QFY22 core net income eased to RM74.5m (-15.4%yoy) mainly due to lower contribution from the hotel division. Net property income of the hotel division fell to RM5.05m (- 71%qoq) as earnings in 1QFY22 were boosted by top up of guaranteed income for Sunway Clio and Sunway Hotel Georgetown.
On yearly basis, 2QFY22 earnings were solid at RM74.5m (+122.3%yoy), bringing cumulative earnings to RM162.6m (+131.1%yoy) in 1HFY22. The earnings growth was largely driven by the earnings recovery of the retail division. NPI of the retail division more than doubled to RM141.9m (+186%yoy) due to lower rental support to tenants and a strong recovery in tenant sales. On the other hand, the contribution of office and services segments were little changed in 1HFY22. Earnings forecast maintained. MIDF makes no changes to the earnings forecast for FY22/23F. It expects earnings in 2HFY22 to remain strong due to the recovery of the retail and hotel division. Earnings contribution of the retail division is underpinned by positive rental reversion.
Similarly, the hotel division is expected to improve due to increased domestic leisure and business travel and the reopening of the Sunway Resort Hotel. Note that Sunway Resort Hotel was closed for refurbishment and it has reopened
progressively since May 2022.
MIDF maintains a Buy call on the stock with an unchanged TP of RM1.68, the research house maintains the call based on the Dividend Discount model. It is also expected the earnings recovery of Sunway REIT to remain decent in 2HFY22 due to improving contribution from retail and hotel divisions. Meanwhile, the distribution yield is estimated at 5.1%
