Find A Rating 
PRESS RELEASES
RAM Ratings affirms AA2 rating of Sunway REIT, A1(s) and P1(s) ratings of debt facilities issued by its funding conduits
Published on 09 Aug 2024.
RAM Ratings has affirmed the AA2/Stable/P1 corporate credit rating (CCR) of Sunway Real Estate Investment Trust (Sunway REIT or the REIT), along with the A1(s)/Stable and P1(s) ratings of SUNREIT Perpetual Bond Berhad’s and SUNREIT Capital Berhad’s (collectively, the Issuers) respective RM10.0 billion Perpetual Note Programme (Perps) and RM3.0 billion Commercial Papers (CP) Programme.
The suffix (s) indicates that the issue ratings have been enhanced beyond the standalone credit position of the Issuers. The Issuers are wholly owned, non-operating subsidiaries of Sunway REIT and depend on inter-company payments from the REIT to meet their debt obligations.
The ratings affirmation is premised on our view that Sunway REIT’s credit fundamentals continue to support its CCRs. The REIT’s market position is considered favourable, with a prime and diversified asset and tenant mix, substantial financial flexibility and healthy debt coverage, which are underpinned by proactive capital management and a balanced funding mix.
The Perps is rated two notches below the REIT’s long-term CCR to account for loss severity and the risk of deferred profit payments. The CP Programme is secured against pledged securities that provide a collateral cover of 5.19 times the REIT’s outstanding pari passu debts, including the CP Programme, as at end-March 2024.
Sunway REIT’s financial performance for 1Q FY Dec 2024 is on track to meet our full-year expectations. While net property income (NPI) declined 6% y-o-y, primarily due to the absence of rental income from Sunway Medical Centre which was disposed of last year and the retail segment’s elevated marketing expenses, the REIT’s NPI margin remained healthy at 73.1% (1Q FY Dec 2023: 75.7%). The combination of a lower NPI and higher interest expense from an enlarged debt load (1Q fiscal 2024: RM3.95 bil; fiscal 2023: 3.72 bil) resulted in narrower fixed charge coverage of 2.80 times (fiscal 2023: 3.04 times).
Nevertheless, we expect the ratio to stay above 3.0 times over the next two years, driven by potential income upside from rental contributions of the REIT’s newly acquired hypermarkets and proposed acquisitions including 163 Retail Park and Prai industrial asset. Additionally, positive rental reversion, a gradual increase in service and promotional charges, and cashflow recovery following the completion of asset refurbishments of Sunway Pyramid Oasis section and Sunway Carnival Mall are anticipated to further solidify the outlook.
Analytical contacts
Tan Yan Choong
(603) 3385 2502
yanchoong@ram.com.my
Tan Han Nee
(603) 3385 2529
munwai@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
© Copyright 2024 by RAM Rating Services Berhad
