Sunway’s venture into providing student accommodations in the UK has been viewed positively by analysts as the move is expected to be accretive to its diversified earnings base.
KUCHING: Sunway Bhd’s (Sunway) venture into providing student accommodations in the UK has been viewed positively by analysts as the move is expected to be accretive to its diversified earnings base.
In a note on Bursa Malaysia, Sunway’s subsidiary, Sunway RE Capital Advisors (SG) Pte Ltd (Sunway RE), announced the execution of a trust deed to establish a private trust in Singapore known as Sunway Residence Trust.
The trust will acquire purpose-built student accommodations in the UK. Upon acquisition of the properties, Sunway RE will establish a fund manager in UK to provide fund management services and appoint an operator to manage the properties.
The trust will have an initialasset under management (AUM) of approximately 38 million pounds or approximately RM202 million which is expected to be injected by the end of the year.
“We are positive on the news as this provides Sunway with a new source of recurring income.
“The Trust will be investing in high quality, well located student accommodations with potential for long-term capital appreciation and recurring income that will be yield accretive to the portfolio.
“As such, we believe this to be accretive to Sunway’s diversified earnings base over the long run,” said the research team at Hong Leong Investment Bank Bhd (HLIB Research).
As the trust will have an initial AUM of approximately 38 million pounds or approximately RM202 million, it noted that its pro-forma calculation implies that net gearing would increase to 0.38-folds from 0.36-folds (as at 2Q19) post injection.
“We note that this sum will be sufficient to acquire a student accommodation located in a prime location which has been earmarked for acquisition and will be announced at a later date,” it added. All in, HLIB Research maintained its ‘buy’ call on the stock.
It explained: “Sunway remains our top pick given its well- integrated property and construction development. Its hidden gem, the healthcare business (with four new hospitals coming on stream over the next three years) has yet to be appreciated as it is embedded within the parent-co.
“These coupled with the resilient earnings from mature investment properties alongside its growing building materials business and quarry operations justifies for the re-rating of the stock.”