KUALA LUMPUR: Sunway Real Estate Investment Trust's (REIT) hotel and retail segments are likely to recover first with easing restrictions, supported by local leisure and business travellers, higher footfall and potential 'revenge spending'.
Hong Leong Investment Bank Bhd (HLIB Research) analyst Farah Diyana Kamaludin expect Sunway REIT's hotel segment to remain soft in the near term following bleak hospitality industry outlook along with temporary closure of Sunway Resort Hotel due to refurbishment.
"With inter-state borders re-opening, we expect gradual respite from domestic leisure and business travelers.
"Sunway REIT will be focusing on cost containment and lean operations by prioritising critical expenditures and enhance distinctive marketing and collaboration," she said in a research note today.
On the retail segment, the overall occupancy remains healthy at 95 per cent, especially for Sunway Pyramid Mall, being strategically located within an integrated township showed resiliency.
"We expect the retail segment to improve gradually from relaxation of restrictions and we foresee pent- up local demand aided by 'revenge spending', like we saw during Recovery Movement Control Order (RMCO) previously."
She said the continuation of 10 per cent electricity tariff rebate would aid in the recovery via reduction in operating costs.
"While we are aware that rental assistance would still be given on a case-by-case basis, we understand the quantum has been cut."
Sunway REIT will be focussing on rebuilding shoppers' confidence by improving safety and hygiene standards, develop asset enhancement initiatives (AEIs) as well as retaining tenants and business partners by working closely together.
Sunway REIT's office segment is expected to be largely stable backed by the new acquisition (the Pinnacle Sunway) as well as strong occupancy and resilient income base across all its office properties.
Sunway REIT will focus on ways to adapt to work-from-home situations by accommodating flexible work stations, customisable enhancements as well as cost saving benefits.
"We feel the speed of vaccine roll out would be crucial in paving the way for business recovery that will follow with more workers coming back into office."
Meanwhile, Sunway REIT's industrial segment saw growth in the e-commerce sector during the pandemic with online shopping becoming the new norm, creating a strong tailwind for the operations of warehousing and logistics companies.
HLIB Research noted that Sunway REIT continues to seek opportunities in this segment in view of Malaysia's resiliency in the industrial sector especially in manufacturing, logistics and distribution activities.
HLIB Research has maintained a "Hold" call with adjusted target price from RM1.48 to RM1.45 per share.