Sunway REIT has delivered a set of commendable financial results for the financial year ended 30 June 2018. Revenue rose 7.2% year-on-year (y-o-y), from RM522.9 million in FY2017 to RM560.4 million in FY2018, underpinned by retail segment and new income contribution from newly completed acquisitions.
Net property income (NPI) expanded by 8.0% y-o-y to RM419.9 million. The topline growth was partially offset by higher interest cost during the year on the back of debt drawn down to fund acquisitions and capital expenditure.
As a result, net realised income increased by 4.2% y-o-y to RM281.9 million with corresponding improvement in distribution per unit (DPU) of 4.1% y-o-y to 9.57 sen. Based on Sunway REIT’s last traded unit price of RM1.77 as at 30 June 2018, the proposed and declared DPU translated into a distribution yield of 5.4%.
The growth in revenue was largely attributable to the retail and hotel segments. The retail segment registered a revenue of RM416.5 million in FY2018, an increase of 2.8% y-o-y, largely attributable to higher revenue contribution from all retail malls except SunCity Ipoh Hypermarket.
The encouraging set of financial performance was on the back of stable occupancy rates across all retail malls. NPI grew in tandem by 2.4% y-o-y to RM296.9 million.
The hotel segment recorded a surge in revenue and NPI for the financial year ended 30 June 2018, benefited from the resumption of income contribution from Sunway Pyramid Hotel pursuant to the completion of its refurbishment in June 2017.
This was further boosted by new income contribution from Sunway Clio Property, a property acquired by Sunway REIT in this financial year. Sunway Clio Property is an integrated development consisting of a 4-star hotel with 401 rooms and a retail podium measuring approximately 88,000 sq.ft. of net lettable area (NLA) strategically located within the integrated township of Sunway City.
Sunway Clio Property is highly synergistic and complementary to the retail and hotel offerings within the Sunway City’s assets cluster. In FY2018, revenue and NPI for the hotel segment soared by 28.2% y-o-y to RM82.6 million and 28.3% y-o-y to RM77.7 million respectively.
Despite massive oversupply condition and highly challenging operating environment, the financial performance of the office segment improved on the back of gradual improvement in average occupancy rates for Menara Sunway and Sunway Putra Tower. However, Sunway Tower’s average occupancy rate remained unchanged. The office segment reported a 6.3% y-o-y improvement in revenue to RM33.5 million with a corresponding 5.9% y-o-y improvement in NPI to RM17.5 million.
During the financial year, Sunway REIT has completed two acquisitions with a total combined property value of RM436 million. Further cementing our leadership position as one of the largest diversified REIT in the nation, Sunway REIT’s property values increased by 8.8% to RM7.28 billion as at 30 June 2018, contributed by acquisitions, fair value gain and capital expenditure.
Datuk Jeffrey Ng, CEO of Sunway REIT Management Sdn. Bhd., commented, “It was indeed a challenging year for Sunway REIT. Our performance was susceptible to uncertainties beyond our control such as the monetary tightening and political uncertainties. That said, I am pleased to announce that in spite of these uncertainties, Sunway REIT managed to deliver a moderate growth in DPU to our unitholders.”
He added, “Our acquisition growth strategy has yielded the desired results. The two newly completed properties have contributed positively to the income stream and cushioned the softer performance in some existing properties.”
Sharing on the prospects, he commented, “The tremendous new supply of retail, hotel and office spaces in the market had led to fundamentally challenging oversupply situation. This is further exacerbated by lacklustre foreign direct investments (FDI) and tourism activities. These fundamental growth drivers of demand for properties requires strong impetus to turnaround.”
He elaborated, “In view of a global interest rate normalisation cycle, the Manager is cautious of the prospects and endeavours to maintain the DPU in FY2019. The retail segment is expected to grow modestly and the hotel segment is expected to grow moderately, however, this will be partially offset by income disruption from the ongoing refurbishment activities at Sunway Resort Hotel & Spa. In a challenging operating environment, we need to upgrade and refresh our hotel amenities to cater to elevate our guests’ experiences and stay relevant to the ever fast changing needs and tastes of our hotel guests.”