Published on 19 Jun 2023.
RAM Ratings has affirmed the P1(s) rating of SUNREIT Capital Berhad’s (the Issuer) RM3.0 bil Commercial Papers (CP) Programme. The Issuer is a wholly-owned non-operating vehicle of Sunway Real Estate Investment Trust (Sunway REIT or the REIT) and relies on inter-company payments from the REIT to meet its obligations under the CP Programme.
The affirmed rating continues to reflect Sunway REIT’s credit profile and the collateral properties pledged to the CP Programme (Secured Properties). The suffix (s) to the issue rating incorporates the strong likelihood of recovery in the event of default through the liquidation of the Secured Properties. As at end-December 2022, the Secured Properties valued at RM7.68 bil provided a collateral cover of 2.38 times over outstanding debts which rank pari passu with the CP Programme, markedly above the 1.67 times required under RAM’s rating methodology for well-secured debt. Loan to value is also below the covenanted maximum 0.50 times under the CP Programme.
Driven by better performances across all segments particularly retail malls and hotels, the REIT’s revenue rebounded to pre-pandemic levels, up 38% and 16% y-o-y at RM651.45 mil and RM182.80 mil, respectively, in FY Dec 2022 and 1Q FY Dec 2023. Net property income margins also widened to 77% and 76%, respectively, from 69% in 2021. Coupled with the REIT’s constant efforts to enhance its properties, the retail and office segments recorded strong renewal rates of 98% and 93%, respectively, in 2022, with positive rental reversion of 4%.
Sunway REIT’s strong financial flexibility – as seen in its diversified sources of debt funding, strong underwriting and subscription commitments from financiers, and a proven ability to access capital markets – mitigates refinancing risk arising from the 44% share of short-term borrowings in its debt mix. Despite new acquisitions and higher overnight policy rates, the REIT’s fixed charge coverage improved to 3.99 times while adjusted leverage rose only slightly to 0.40 times as at end-March 2023 (2021: 2.56 times and 0.38 times), thanks to the management’s proactive capital management strategy to keep financing cost low while maintaining a balanced debt profile.
Liew Kar Ling
(603) 3385 2586
Tan Han Nee
(603) 3385 2529
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Ratings on SunREIT Capital Berhad