Sunway REIT has proposed to acquire a retail mall in Mont Kiara, Kuala Lumpur, for RM215m which is situated in a highly sought-after and high-income residential area. Hence, the mall is expected to be resilient and less affected by the supply of new malls. Kenanga believes SUNREIT is paying a fair price for the asset, the house maintains its forecasts of TP of RM1.63 and an OUTPERFORM call.
It was reported by the seller YNH Property that is had disposed a freehold prime retail mall, called “163 Retail Park” located in Mont Kiara, Kuala Lumpur to Sunway REIT. The mall is positioned 11 km from Kuala Lumpur City Centre, Mont Kiara is a sought-after residential area for expatriates and affluent families in the upper-middle income group. The property features a gross floor area of 76k sq m spread across seven stories, including a net leasable area (NLA) of 23k sq m (or 255.5k sq f
The mall is currently at a 94% occupancy rate, the acquisition cost of RM215.0m translates to RM841/sq ft. The house believes this is a fair price, a compared to past transactions of close proximity malls in the last decade at RM774/sq ft, or at an 8% premium, as the mall is located in densely populated and affluent well-established neighbourhood. Hence, we are
positive in the acquisition as its suitable location should support sustainable occupancy rate as well as rental earnings. At an anticipated 6.5% yield from this acquisition, this should translate to an additional RM14m in net profit to SUNREIT, which would increase our FY24F earnings by 4%.
Kenanga said it maintains earnings for now, pending the release of the upcoming full year earnings. The low yield spread reflects SUNWAY’s diversified asset portfolio in key urban regions. The house reckons that the group’s brand equity also benefits greatly from its affiliation to the Sunway conglomerate.
