KUALA LUMPUR: CIMB Research is maintaining its Hold call on Sunway REIT, with an unchanged target price of RM1.53.
It said on Tuesday Sunway REIT is acquiring two properties, a hotel in Penang and an office tower in Shah Alam, for RM134mil from majority shareholder Sunway Bhd's subsidiaries.
The hotel, Sunway Hotel Georgetown, is a four-star 250-room hotel in George Town, Penang, and will cost RM74mil.
The hotel will be leased back to the vendor, Sunway Biz Hotel (SBH), post the acquisition, with guaranteed rent for Sunway REIT amounting to RM4.4mil per annum for the first two years and RM3.3m per annum for the next eight years.
The office, Wisma Sunway Property, is a stratified 19-storey office building in Shah Alam and will cost RM60mil. 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.
“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,” it said.
CIMB Research said it was not making any changes to its forecasts pending more details on the properties.
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, it said. - The Star
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