Sunway Real Estate Investment Trust
(June 26, RM1.60)
Maintain hold with an unchanged target price of RM1.60: We visited Sunway Putra Mall (SPM) to get a closer look of the mall after its soft launch on May 28, 2015. After approximately two years of refurbishment works, SPM has finally reopened with an occupancy rate of 70% after all the tenants started operations on a progressive basis, while management remains committed to bringing the occupancy level to 100%.
Total capital expenditure spent was approximately RM307 million, which involved the creation of approximately 71,000 sq ft of additional net lettable area (NLA), bringing the total NLA to approximately 560,000 sq ft.
The design of SPM was inspired by South-Africa’s Sun-drop Diamond and positioned itself as an urban-chic lifestyle mall. SPM will house over 300 outlets. It has a strong catchment population of two million within a 25km radius, which could potentially attract crowds from Jalan Duta, Jalan Kuching, Bangsar, Bukit Tunku and Mont’Kiara. In addition, we also think that SPM will be able to attract shoppers nearby as it is just within walking distance to the Putra World Trade Centre (PWTC) and Seri Pacific Hotel.
We noted that there are linkages which direct shoppers to the mall, including the newly-built escalator from the PWTC LRT station and coming soon for Villa Putri, an entrance from the elevated walkway in front of the mall and also an escalator connecting Seri Pacific Hotel and the mall, which is currently in progress.
In view of the current challenging outlook for the retail industry, we think the mall that caters for mid-income earners will perform slightly better compared to super-prime retail malls. Our earnings forecasts remain unchanged as we have factored in the contribution in our financial model. We may revisit our forecasts when occupancy reaches 100%. — HLIB Research, June 26
This article first appeared in The Edge Financial Daily, on June 29, 2015. Subscribe here.