Sunway-REIT’s Seberang Jaya hotel sale a positive

PETALING JAYA: Analysts are generally positive on Sunway Real Estate Investment Trust’s (Sunway-REIT) sale of Sunway Hotel Seberang Jaya (SHSJ) and the revised investment cost for its Sunway Pier project.

Maybank Investment Bank Research (Maybank IB) said it views the disposal and reinvestment as strategically sound, reflecting proactive asset rotation and portfolio renewal.

The research house noted that Sunway Pier’s redevelopment cost has increased to RM462mil from RM400mil, bringing total property development activities (including the new hotel) to RM602mil or 5.6% of total asset value.

“While near-term upside is limited, the new hotel atop Sunway Carnival Mall and the ongoing Sunway Pier project should enhance portfolio yield and growth visibility beyond financial year 2027 (FY27),” it said.

Sunway-REIT, in an announcement to Bursa Malaysia on Tuesday said it is undertaking an asset exchange, disposing of SHSJ for RM60mil to Sunway Medical Centre Penang while concurrently constructing a new 192-room hotel atop Sunway Carnival Mall costing RM140mil.

The new hotel, slated for completion by end-2027, is strategically timed to complete at the same time as the SHSJ disposal.

Despite active asset rotation, Maybank IB expects gearing to remain around 38% to 41%, as disposal proceeds will partly offset new development funding.

The research house maintained its “hold” stance on Sunway-REIT with an unchanged dividend discount model (DDM)-based target price of RM2.21, viewing the disposal’s impact as earnings-neutral.

CGS International (CGSI) Research also kept its forecasts and DDM-based target price of RM2.16, pending further clarity on the proposed disposal and new development projects.

It reiterated its “hold” stance, noting limited upside with a modest FY26 dividend yield of 5.1% versus the sector average of 5.5%.

“We believe Sunway-REIT’s earnings outlook for forecast FY25F-FY27 remains resilient, underpinned by healthy private consumption growth and incremental earnings from new assets.

“Downside risks include lower occupancy and negative rental reversions, while upside risks include higher rental reversions, and stronger hotel earnings,” CGSI Research said.