Affin Hwang maintains ‘Buy’ on SunREIT, cuts TP to RM2

KUALA LUMPUR: Affin Hwang Capital research has lowered its earnings forecasts for Sunway REIT but still expects growth in FY20E on higher contribution from certain assets.

The research house made 2% to 5% cuts in the REIT’s 2020-2022E EPU on expectation of lower contribution from the hotel segment due to soft market conditions and lower revenue assumptions for Sunway Putra Mall.

However, Affin Hwang expects Sunway REIT to report higher earnings in FY20E on contribution from Sunway University Campus, Sunway Pyramid and a revenue recovery at Sunway Resorts Hotel & SPA.

Over the long term, Sunway REIT is looking to expand its asset portfolio by up to 88% by 2025.

“Broadly, we like the management’s plan, so long as the acquisitions are earnings-accretive.

“A diversified asset base should lower earnings risks while a larger market cap (if these acquisitions are partly funded by equity) should increase the REIT’s liquidity,” said Affin Hwang.

It added that the asset pipelines comprising retail, offices, education and medical assets of the sponsor are good candidates for future acquisitions.

The research house maintained its buy rating on the REIT but lowered its target price to RM2.

Source: TheStar