PETALING JAYA: Malaysia has become the preferred listing destination for Sunway City Bhd’s (SunCity) proposed real estate investment trust (REIT) although it is not ruling out other proposals for reverse takeovers in Singapore and Australia.

“The authorities in Malaysia are very proactive and doing their level best to get the more established companies to list in Malaysia,” SunCity executive director Datuk Jeffrey Ng told StarBiz yesterday.

Industry sources added that companies also had a more positive view following the revamp of main and second boards into a unified board, further improvement in processes and procedures as well as liberalisation of the 30% bumiputra quota in 27 service sub-sectors.

“Malaysia is definitely a preferred destination,” said Ng. “But we are not closing our doors to other opportunities.

If something very firm comes up, we will study it in the best interests of shareholders, one of which is GIC (Government of Singapore Investment Corp).’’ Early last year, SunCity was reported to be more keen on listing in Singapore where the tax regime is more attractive to REIT investors in relation to withholding tax.

However, the global financial crisis, which erupted in the later part of last year, has changed the scenario and investors turned risk averse.

In terms of mandate, this represents a fresh opportunity to select possibly new parties that can give the best terms. Under the old mandate, the global investment banks were Goldman Sachs and UBS while the local investment banks were CIMB Investment Bank and RHB Investment Bank.

“There could be new parties involving global and local investment banks,” said Ng. “Such a major fund-raising exercise will have to go into the global markets. At the end of the day, we will study what the most aggressive investment bankers have to offer.”

In the wake of early market recovery, SunCity is monitoring the indicators and will make every effort to get into the market as fast as possible. “We don’t want to miss out or be considered slow. We are watching the markets closely,” he said. “If there is a window of opportunity that fits our criteria, we will definitely implement (the listing).”

Among the factors involved are market timing and the need to balance yields in the REIT market and bond yields, which represent the cost of funds and is an indicator used in the calculation of REIT pricing. Investors would also weigh their options in the REIT and bond markets.

StarBiz recently reported that backed by assets valued at RM3.7bil, the proposed REIT listing is possibly the largest in the country. According to the report, about 75% of SunCity’s operating profit of RM175mil for the first half ended Dec 31, 2008, was from its property investment assets and SunCity was expected to receive total rental income of RM285mil this calendar year of which 70% would be from Sunway Pyramid Shopping Mall.

AmResearch managing director/regional head Benny Chew suggested that SunCity list its REIT at a point when property stocks were trading close to their net asset value.

“It will then be seen as a good alternative investment,’’ said Chew, who also expressed concern over the inclusion of diversified assets into the REIT as he considered suburban retail to be the main growth driver. “In general, they have to convince investors on their strategies to grow the fee income.’’

However, other analysts pointed out that SunCity’s proposed REIT would have assets with synergistic benefits in the integrated resort city, education, medical and office, retail, hotel and leisure theme park.

“Next year should be more exciting for the listing,” said a senior analyst with a foreign research house. “It will be cheaper as currently REIT yields are high on worries that rentals might weaken.”

ECM Libra Researchacting research head Ching Weng Jin agreed it was time to dust the proposals previously kept on the shelf as market sentiment had changed compared with six months ago. “The properties are well-managed and rental yields are good. It is also more encouraging to list here in view of liberalisation of rules.”