SunREIT debuts at 89 sen

KUALA LUMPUR: Sunway Real Estate Investment Trust (SunREIT), Southeast Asia's largest initial public offering (IPO) this year, opened on Bursa Malaysia on Thursday, July 8 at 89 sen per unit with 4.8 million units traded.

The opening price was one sen below the institutional offer price of 90 sen and one sen above the retail price of 88 sen. SunREIT closed at 88.5 sen, falling slightly below the opening price, against the market's upward trend. It reached a high of 89.5 sen and touched a low of 87.5 sen.

Analysts said this may have been due to retail investors disposing of their holdings slightly above the issue price or certain investors preferring now to turn their attention to CapitaMall Malaysia Trust (CMMT), which is bound for listing on July 16.

The back-to-back listing of SunREIT and CMMT has seen yields being raised as they vie for retail investors' participation.

"Based on the institutional offering of 90 sen per unit, SunREIT offers a yield of about 7.5% for the financial year June 30, 2011," said Tan Sri Dr Jeffrey Cheah, Sunway group founder and chairman, at SunREIT's listing ceremony here on Thursday.

This works out to a distribution yield of 7.6% for retail investors, which is slightly higher than the 6.9% yield in the prospectus released on June 15.

SunREIT's much-anticipated listing had been delayed on numerous occasions during the past five years. With on Thursday's listing, it raised RM1.5 billion. The issue was slightly over-subscribed by the Malaysian public, with a subscription rate of 1.01 times.

Datuk Jeffrey Ng, CEO of Sunway REIT Management Sdn Bhd, manager of SunREIT, said 45% of subscribers were foreigners.

"It is quite a feat, but the uncertainty in Europe is surely a contributing factor. We are not in a bull market and investors can be quite risk averse. In Malaysia, the volatility is not so severe. REITs are a defensive play which suits the current environment," Ng told The Edge Financial Daily.

Analysts agreed as the retail portion of the REIT, which makes up 70% of the portfolio size, is dependent on tenant rental, and not recreational expenditure, which is more volatile.

Ng added that there had been various property bubbles in Asia. In comparison, Malaysian property is more attractively priced, with more potential for growth.

SunREIT is among the largest in Asia, with a total retail net lettable area of 2.3 million square feet and a market capitalisation of RM2.41 billion.

The trust's eight assets comprise Sunway Pyramid Shopping Mall, Sunway Carnival Shopping Mall, SunCity Ipoh Hypermarket, Sunway Resort Hotel & Spa, Pyramid Tower Hotel, Sunway Hotel Seberang Jaya, Menara Sunway and Sunway Tower.

Going for growth Ng had mentioned a month ago that SunREIT was looking to double its asset base from RM3.78 billion in five to seven years. However, he did not specify which assets would be injected next.

"There are plenty of opportunities on the plate. However, for the purposes of today, I wouldn't want to be specific or speculate on the timing," Ng told reporters after the listing ceremony.

An institutional investor told The Edge Financial Daily that the next assets to be injected into the trust may include a new tower (next to Sunway Tower) or other assets within the Bandar Sunway township, namely Sunway Medical Centre and Sunway International School.

Construction work on the new tower has not started but company representatives expect it to be completed by 2012. The building is situated on prime land in the city centre, next to Sunway Tower, which has been injected into SunREIT. Sunway Tower was formerly known as Wisma Denmark.

"We have seen the plans for the new tower, but full approvals have not yet been obtained. Construction will likely take place this year," company officials told The Edge Financial Daily.

Currently, expansion or extension works are also carried out at Sunway Medical Centre and that is scheduled to be completed by 2015. The building will be completed and released in phases.

Extension works are also ongoing for Sunway Pyramid (phase three), Menara Sunway, Sunway International School and Sunway University College.

"The third phase of Sunway Pyramid will include office buildings. Adjacent to Menara Sunway, offices and al-fresco dining areas will be constructed. Sunway International School will be housed in a brand new location. These will be completed in the next few years," said company officials.

Although extensive work is being done on Sunway University College, the institution has been placed under a trust and held for non-profit purposes. Hence, it may not be easily transferable to SunREIT.

During the press conference, officials within the Sunway Group agreed that the listing did not take place two years ago due to market timing, whereas five years ago the listing was delayed due to the expansion works.

"Five years ago, the hotel housed only 400 rooms. We foresaw future demand and embarked on an expansion exercise. It would not have been appropriate to perform an IPO on assets in development," said a company official.