KUALA LUMPUR (Aug 12): Sunway Real Estate Investment Trust (REIT) fell as much as five sen or 3.3% to RM1.48 despite an impressive set of financial results for its fourth quarter ended June 30, 2015 (4QFY15).

Yesterday, Sunway REIT (fundamental: 1; valuation: 0.65) reported higher 4QFY15 net profit of RM357.91 million from RM235.21 million a year earlier. Revenue was up at RM114.94 million from RM109.22 million.

Net profit was higher than revenue as the property trust registered higher real estate revaluation gains of RM306.75 million versus RM179.12 million. Full-year net profit rose to RM541.44 million from RM411.12 million.

At 12.30pm today, Sunway REIT shares pared losses to settle at RM1.49 with some three million shares traded. The FBM KLCI fell 23.23 points or 1.4% to 1,613.48.

Sunway REIT shares had fallen despite its income distribution or dividend.

The group declared a distribution per unit of 2.05 sen for 4QFY15, bringing the full-year distribution to 8.73 sen.

At 8.73 sen, Sunway REIT offers a dividend yield of 5.7% based on its latest closing share price of RM1.53. The dividend yield compares with Bank Negara Malaysia's overnight policy rate of 3.25%.

Analysts are optimistic on the outlook of Sunway REIT, the portfolio of which, includes retail properties and hotels across Malaysia.

In a note today, Hong Leong Investment Bank Bhd (HLIB) said Sunway REIT had the largest acquisition pipeline among Malaysian REITs. HLIB said Sunway REIT had a strong backing from its sponsor Sunway Bhd and was well diversified across various segments.

However, HLIB said Sunway REIT was still heavily reliant on Bandar Sunway amid persistent weakness in the office segment due to oversupply.

HLIB maintained its "hold" recommendation on Sunway REIT shares with a target price (TP) of RM1.60.

MIDF Amanah Investment Bank Bhd said in a note today it was maintaining its "neutral" call on Sunway REIT with a TP of RM1.62.

“Despite FY15 earnings coming in within our expectations, we reduce our earnings forecast for both FY16 by -5% as we impute lower occupancy rates for Sunway Tower to 40% (from 68%).

“Despite the growth of +4% year on year seen in FY15 core net income, earnings growth may come under pressure in FY16 due to the weaker office and hotel segments. Having said that, downside is supported by decent FY16 dividend yield of 5.4%,” said MIDF Research.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)