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Sunway jumps to highest in 2 years on REIT plan

KUALA LUMPUR: Sunway City Bhd (SunCity) jumped six sen or 1.62% to close at RM3.76 yesterday on the company’s real estate investment trust (REIT) plan, which received positive response from analysts.

The counter rose to an intra-day high of RM3.82, its highest level in two years.

Analysts said the REIT plan, which they estimated to be valued at between RM2.4 billion and RM2.9 billion, was another step closer to realising the long-awaited plan to list a REIT.

SunCity on Wednesday announced it would dispose of eight properties to a REIT to be established by subsidiary Sunway REIT Management Sdn Bhd.

The properties are the four-storey Sunway Pyramid Shopping Mall, the 19-storey five-star Sunway Resort Hotel & Spa, Pyramid Tower Hotel, the purpose-built office development Menara Sunway, the five-storey Sunway Carnival Mall, the 17-storey Sunway Hotel Seberang Jaya, the single-storey Suncity Ipoh Hypermarket and 33-storey office building Sunway Tower2.

HwangDBS Vickers Research Sdn Bhd upgraded SunCity to a buy from hold previously, with a revised higher target price of RM4.70 (from RM3.10 previously), and said the REIT plan would unlock value and improve the return on assets.

It expects the disposal to be satisfied by cash and shares, adding that SunCity will likely maintain a 33% stake, while Government of Singapore Investment Corporation Pte Ltd (GIC), which owns 48% of Sunway Pyramid and Sunway Resort Hotel, could also be a major shareholder.

“The REIT assets are estimated to be worth RM3.5 billion. We understand management is targeting for 6%-7% yield versus the sector’s 8.5% — a premium for being the largest Malaysian REIT with visible acquisition pipeline (possibly another RM2 billion).

This article appeared in The Edge Financial Daily, April 9, 2010.
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