KUALA LUMPUR (Nov 6): Sunway Real Estate Investment Trust (REIT) net profit rose 14.53% on-year to RM63.45 million in its first financial quarter ended Sept 31, 2014 from RM55.4 million, lifted by higher net property income from the retail and hotel segments.

Revenue came in 13.61% higher at RM113.81 million from RM100.18 million a year ago. Earnings per share improved to 2.17 sen from 1.90 sen a year earlier.

The REIT declared a first income distribution of 2.28 sen for the first quarter ended Sept 30 this year, to be paid on Dec 4, 2014.

In a filing with Bursa Malaysia today, the REIT said the retail segment registered gross revenue of RM81.2 million for the quarter ,  up 15.6% or RM11.0 million, compared to the previous corresponding quarter, supported by resilient performance of both Sunway Pyramid Shopping Mall and Sunway Carnival Shopping Mall.

Additionally, the hotel segment registered 18.9% or RM2.7 million higher gross revenue to RM17 million, due to better performance of all the hotels except for Sunway Putra Hotel.

It said: “The performance of this hotel was adversely affected by the ongoing major refurbishment works at the adjoining Sunway Putra Mall since May 2013 and the hotel's own refurbishment where average occupancy rate for the current quarter slipped to 36.4% from 43.8% in 1Q 2014.”

The office segment recorded marginally lower gross revenue of RM10.7 million for the quarter under review.

On its healthcare sector, Sunway Medical Centre contributed RM5 million of revenue and net property income for 1Q 2015, an increase of 4.8% compared to 1Q 2014 due to rental reversion in accordance with the master lease agreement and additional income contribution from completion of the asset enhancement.

However, the REIT said finance costs for 1Q 2015 was up 5.1% to RM16.3 million, due to additional commercial papers issued/revolving loan drawn down to fund capital expenditure. The increase in overnight policy rate by 25 bps in July 2014 had also resulted in higher interest expense on the floating rate borrowings.

Moving forward, Sunway REIT Management Sdn Bhd, the manager of the REIT, expects its distribution per unit (DPU) to grow moderately in FY2015 with Sunway Putra Mall expected to reopen in 4QFY2015.

“The manager is committed to distribute 100% of its distributable net income for FY2015,” it said.

In a press statement today, Sunway REIT Management Sdn Bhd CEO Jeffrey Ng said while he was mindful of the impending higher vacancy for its Kuala Lumpur office assets, such as Sunway Tower and Sunway Putra Tower, it gave the opportunity to further diversify tenancy mix to reduce tenant concentration risk.

“As for Sunway Putra Tower, we would like to seek more private sector tenants in line with our strategy post-refurbishment. Although income contribution from the office segment is expected to be significantly lower in FY2015, it is not expected to have a material adverse impact on our FY2015 DPU,” Ng said.

Sunway REIT’s counter closed unchanged at RM1.51, giving it a market capitalisation of RM4.43 billion.