KUALA LUMPUR (Nov 23): Sunway Real Estate Investment Trust's (REIT) net property income (NPI) for the three months ended Sept 30, 2020 (1QFY21) stood at RM68.09 million, down 42.8% year-on-year (y-o-y) from RM119.07 million in the corresponding three months a year ago, as it saw lower contributions from its retail and hotel segments.

Revenue was down 30.8% y-o-y to RM107.44 million from RM155.35 million, its filing with Bursa Malaysia showed. The quarter is classified as "other" as the REIT had recently changed its financial year end to Dec 31, from June 30.

In particular, it noted that its retail segment saw lower revenue due to its ongoing rental support programme, while the hotel segment was affected by the closure of Sunway Resort Hotel to undertake phased refurbishment and the loss of business due to inbound travel restrictions.

On Oct 12, the REIT announced an interim income distribution of 90 sen per unit for the quarter — down 64% from the corresponding quarter last year — which it paid in advance on Nov 10, prior to the issuance of new units under a private placement exercise. It raised RM710 million from the exercise, which was completed on Oct 28, with part of the proceeds used to complete the acquisition of The Pinnacle Sunway on Nov 20.

On a quarter-on-quarter (q-o-q) basis, the REIT's NPI is down 12.3% from RM77.61 million in the three months ended June 30, as it recorded higher property operating expenses, mainly due to the provision of doubtful debts for the retail segment.

Still, its latest revenue is up 2.4% q-o-q from RM104.93 million, as retail tenants and hotel operators progressively resumed business operations under the Recovery Movement Control Order (RMCO) that started from June 10.

"We are encouraged by the recovery in the retail footfall during the RMCO period. That said, tenants' sales have not fully recovered to pre-pandemic level and it is imperative to continue to support our tenants to survive through this difficult period," said the REIT manager's chief executive officer Datuk Jeffrey Ng in a statement.

"The reimposition of Conditional Movement Control Order in the Klang Valley and selective states in Malaysia amidst the recent resurgence of Covid-19 transmission is hindering the recovery process for the quarter ending Dec 31, 2020, particularly for the retail and hotel segments. These cyclical segments are more vulnerable to any tightening measures imposed in managing the containment of the pandemic," Ng added.

Having said that, he noted that the recent recovery during the RMCO in June suggests these segments are on track for a gradual recovery in the later part of the financial period when the pandemic stabilises. "Sunway REIT's earnings are also partially cushioned by its diversified asset portfolio and new income contribution from the recently acquired The Pinnacle Sunway," Ng said.

Going forward, despite the prevailing tough operating environment, the REIT will continue to pursue its midterm aspirations that include growing its property value to RM15 billion by financial year 2025, as outlined in its TRANSCEND 2025 plan. "We see opportunities of asset disposals by vendors with stretched balance sheet, demand for assets within the emerging sub-sectors as well as mergers and acquisitions opportunities," Ng added.

Sunway REIT's unit price settled two sen or 1.32% higher at RM1.54 today, giving the trust a market capitalisation of RM5.27 billion. Year to date, the REIT's unit price is down 16.3% from when it was trading at RM1.84.