Sunway Real Estate Investment Trust

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by RHB

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by CGSI

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by TA
BUY – TP RM1.98

"Refined Transcend 2027 Strategy to Maximise Potential”

The recent engagement with Sunway REIT’s management revealed a pivotal shift in the REIT’s strategic direction. In a thoughtful recalibration of its Transcend 2027 strategy, Sunway REIT is intensifying its focus on retail—the sector where it has historically excelled—while scaling back its earlier ambitions to significantly diversify into services, industrial, and international properties. We are positive on this refined approach as it underscores a strategic decision to capitalise intensively on Sunway REIT’s most robust asset class, ensuring focused growth and enhanced shareholder value. Maintain Buy on Sunway REIT with an unchanged TP of RM1.98, based on target yield of 5.5% and a 3% ESG premium

Analyst:
Thiam Chiann Wen
cwthiam@ta.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by RHB
Buy – TP RM 1.92

"Recalibrating TRANSCEND 2027; Maintain BUY”

Maintain BUY, with new DDM-derived MYR1.92 TP from MYR1.85, 16% upside and c.7% FY25F yield. Our sector top pick Sunway REIT is recalibrating its strategic roadmap, TRANSCEND 2027, to refocus its efforts on its core strengths in retail, and foregoing its previous targets to strictly rebalance its portfolio with a higher mix of services, industrial, as well asadding foreign properties. We are positive on the strategic change as we think this affords the REIT more room to focus on yield-accretive acquisitions, via organic and inorganic fronts.

Analyst:
Wan Muhammad Ammar Affan
ammaraffan@rhbgroup.com
Loong Kok Wen CFA
loong.kok.wen@rhbgroup.com

People often flock to blue-chip stocks or REITs, or well-known PLCs when they first start investing in Bursa. After all, it’s considered the “safest”.

I remember buying $MAYBANK / 1155 (MALAYAN BANKING BERHAD) $CIMB / 1023 (CIMB GROUP HOLDINGS BERHAD) $KLSE-CAPITALA $SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST) $YTLREIT / 5109 (YTL HOSPITALITY REIT) ... that was 5 years ago.

As one progresses further, then you’ll start to know that there are more than just those handful of stocks. Then, you start to learn about basic ideas like dividend yield, and realise many misconceptions like share price doesn’t mean the stock is expensive or cheap.

PSA: A RM1.50 stock is not more “expensive” than RM0.95…… a better measure is to look at the market capitalization. But even then, that’s just barely scratching the surface of valuation.

To determine if the company is a “good deal” or an “expensive deal” is going into valuation, and it is knowing how much you are paying for the thing you're buying.

If you do not know what you are buying, how would you know if you’re paying a good price for it?

Imagine, there are 2 mystery gift boxes in front of you:
Giftbox A has nothing, but may have good packaging, it is RM100 price tag
Giftbox B has 10g gold bar in it, but is in a carton box, it is RM1000 price tag.
Which is more expensive?

In this context, share price is just the price tag, it doesn't indicate if you are buying something valuable or with a reasonable price.

So, how do you know the amount of “gold” inside the giftboxes? Look at stocks as businesses, read their quarter reports and annual reports, to KNOW what you are buying.

Anyway, I digress. I hope more people don’t just say a company stock is expensive just because it’s above RM1. Sekian.

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by TA
Buy – TP RM1.98

“Achieved Encouraging Rental Reversions"

Following the change in earnings estimates, we arrive at a new TP of RM1.98/unit (previously RM1.93/unit), based on a CY25 target yield of 5.5% and a 3% ESG premium. Maintain Buy.


Analyst:
Thiam Chiann Wen
cwthiam@ta.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by RHB
Buy – TP RM1.85

“Stable Growth Led By The Retail Segment; BUY"

Maintain BUY, new DDM-derived MYR1.85 TP from MYR1.77, 12% upside with c.6% FY24F yield. Sunway REIT’s results were in line with our expectations, recording higher revenue growth attributed to Sunway Carnival Mall’s expansion and elevated occupancy rates for the hotel segment. We remain positive on the REIT’s outlook, as its acquisition strategy should drive earnings growth on top of the solid growth prospects from its diverse property portfolio.

Analysts:
Wan Muhammad Ammar Affan
ammaraffan@rhbgroup.com
Loong Kok Wen CFA
loong.kok.wen@rhbgroup.com

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by Public
Neutral – TP RM1.55

“No Surprises"

Sunway REIT (SREIT) chalked a 2QFY24 realised net profit of RM78.0m (+16.1% YoY, -4.8% QoQ), which came in within our and consensus full-year estimates. In 1HFY24, the reported profits constitute about 47% and 45% of our and consensus full year estimates. The Group’s net property income (NPI) surged by 11% YoY to RM129.3m while revenue increased by 5% YoY to RM175.6m in 2QFY24, primarily driven by robust performance from retail and hotel segments. We expect subsequent quarters to be stronger, driven by the acquisition of six hypermarkets which was completed in April 2024 (purchase consideration of RM520m). All told, no change to our earnings estimates. Given the limited share price upside, we maintain our Neutral call with TP unchanged at RM1.55.

Analyst:
Tan Siang Hing
research@publicinvestbank.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by MIDF
Buy – TP RM1.81

“Better Earnings Outlook for Retail Division"

• 1HFY24 earnings within expectations
• Lower sequential earnings on seasonal factor
• Better earnings outlook for retail division
• Earnings forecast maintained
• Maintain BUY with an unchanged TP of RM1.81

Analyst:
Jessica Low Jze Tieng
jessica.low@midf.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by Maybank
Buy – TP RM1.77

“2Q24: New hypermarkets on board"

2Q24 earnings and an interim gross DPU of 4.66sen were in line. 2Q24’s YoY earnings growth was mainly due to its stronger retail segment. We expect higher earnings in 2H24, supported by new assets contribution - 163 Retail Park, a new industrial property in Penang, and Kluang Mall. We raise FY25/26E earnings forecasts by +8% p.a., which increase our DDM-TP to MYR1.77 (+17sen, Ke: 8.1%). Upgrade BUY.

Analyst:
Nur Farah Syifaa
nurfarahsyifaa.mohamadfuad@maybank-ib.com

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by Kenanga
Market Perform – TP RM1.69

“Eyes on Sunway Carnival Mall"

SUNREIT’s 1HFY24 results met expectations. Its core net profit grew by a marginal 1% YoY as new income streams were largely offset by earnings gap arising from the disposal of Sunway Medical Centre. 2Q rental reversion for Sunway Carnival Mall was impressive coming in at above 10%. We keep our forecasts, TP of RM1.69 and maintain our MARKET PERFORM call.

Analyst:
Chris Tong
christong@kenanga.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by HLIB
Buy – TP RM1.81

“Slight hiccup"

SunREIT’s 2Q24 core net profit of RM78.1m (-4.8% YoY, +16.1% YTD) brought 1H24’s sum to RM160.1m (+0.8% YoY), which was below ours but within street estimates at 41% and 45% respectively. The negative deviation was due to higher-than-expected finance costs. In view of the results shortfall, we cut our FY24/25/26 forecasts by -6.9%/-6.9%/-6.7% respectively, as we impute higher finance costs. Nonetheless, sequential earnings should improve given (i) higher portfolio rental reversions post completion of AEI activities at Sunway Pyramid and Sunway Carnival Mall; (ii) stronger retail spending thanks to government initiatives; (iii) higher tourist arrivals; and (iv) 3 ongoing acquisitions to be completed in 3Q-4Q24. Maintain BUY with a lower TP of RM1.81.

Analyst:
Tan Je Jyne
JJTan@hlib.hongleong.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by Kenanga
Market Perform - TP RM1.69

"Acquiring Mall in Johor for RM158m"

SUNREIT is acquiring a retail mall in Kluang, Johor, for RM158m. The acquisition is earnings and valuation accretive at a 6.8% yield.
We believe SUNREIT will give its competitors in the fairly saturated market a run for their money by enhancing the tenant mix and shopping experience at the mall. We raise our FY25F earnings forecast by 2%, lift our TP by 2% as well to RM1.69 (from RM1.65) but maintain our MARKET PERFORM call.

Analyst:
Clement Chua
clement.chua@kenanga.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by TA
Buy – TP RM1.93

“Acquiring Kluang Mall"

Incorporating a 3% ESG premium, we adjust our TP to RM1.93/unit from RM1.88/unit previously. Our TP is based on an unchanged target yield of 6.0%. Maintain Buy.

Analyst:
Thiam Chiann Wen
cwthiam@ta.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by MIDF
Buy – TP RM1.81

“Acquisition of Kluang Mall"

• Acquisition of Kluang Mall
• Expanding retail footprint to central Johor
• Earnings forecast revised upwards
• Maintain BUY with a revised TP of RM1.81

Analyst:
Jessica Low Jze Tieng
jessica.low@midf.com.my

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUMPULAN WANG PERSARAAN (DIPERBADANKAN) ("KWAP")

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by RHB
Buy – TP RM1.77

“Bright Prospects Ahead; Maintain BUY"

Maintain BUY, with new DDM-derived MYR1.77 TP from MYR1.74, 12% upside and c.7% FY25F yield. We believe Sunway REIT’s diverse property portfolio and active acquisition strategy will be its key earnings driver. In the medium term, retail rental rates should be boosted following the ongoing asset enhancement initiative (AEI) in Sunway Pyramid and Sunway Carnival, as well as our expectation of hotel room rates remaining high as occupancy rates continue to improve. With gearing at 43%, the REIT will likely need to fund future acquisitions via equity.

Analysts:
Wan Muhammad Ammar Affan
ammaraffan@rhbgroup.com
Loong Kok Wen CFA
loong.kok.wen@rhbgroup.com

REIT
$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST) $AXREIT / 5106 (AXIS REAL ESTATE INVESTMENT TRUST)
Research by MIDF
Positive

“Defensive earnings”

Maintain POSITIVE on REIT. We continue to see a positive outlook for REIT, led by retail and industrial sub-segments. Retail industry is expected to return to organic growth of positive rental reversion as retail industry recovered to pre-pandemic level. Meanwhile, performance of industrial asset is expected to remain stable while rental rate is expected to grow due to healthy demand for industrial asset. We also see that hotel industry will continue to recover in 2HCY24 as tourist arrivals are expected to increase as Malaysia is offering visa-free entry to travelers from several countries which will boost tourism industry of Malaysia.

Analyst(s):
JESSICA Low Jze Tieng
jessica.low@midf.com.my

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by Public
Neutral – TP RM1.55

“New Assets To Lift Earnings"

Sunway REIT’s (SREIT) 1QFY24 realised net profit was down 10.4% YoY to RM82m, which came in within our and consensus full-year estimates. Year-to-date (YTD), the reported profits constitute about 25% and 23% of our and consensus full year estimates. Weaker Group realised net profit was mainly due to lower contribution from the Services segment after the disposal of Sunway Medical Centre (Tower A & B) in 3QFY23, though mitigated by the improved performance from the Hotel, Office and Industrial & Others segments. During the quarter, SREIT registered net property income (NPI) of RM130.5m and revenue of RM178.6m driven by performance across its core segments of retail, hospitality and office. Separately, it completed the acquisition of six hypermarkets (purchase consideration of RM520m) which will improve its earnings in the upcoming quarters. As such, we tweak our FY24-26 profit forecasts upwards by 6%-17% to account for these new assets. Given the limited share price upside, we maintain our Neutral call with TP unchanged at RM1.55.

Analyst:
Tan Siang Hing
research@publicinvestbank.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by MIDF
Buy (Maintain) – TP RM1.70

“Positive Outlook"

Maintain BUY with an unchanged TP of RM1.70. We maintain our earnings forecast for FY24F/25F/26F. We also maintain our TP for Sunway REIT at RM1.70 based on dividend discount model. We remain positive on Sunway REIT as its contribution from its retail division should remain stable in the long term on the back of positive rental reversion. Besides, outlook for hotel division is also improving with expectation of higher tourist arrivals. Hence, we maintain our BUY call on Sunway REIT. Meanwhile, distribution yield is attractive, estimated at 5.7%.

Analyst:
Jessica Low Jze Tieng
jessica.low@midf.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by Maybank
Hold – TP RM1.60

“1Q24: Earnings on track"

1Q24 results were in line with our and consensus’ FY24E forecasts. The softer YoY earnings were mainly due to the absence of rental income from Sunway Medical Centre (Tower A & B). We however expect FY24E earnings to be supported by the completion of new acquisitions of six hypermarkets (i.e. Giant), 163 Retail Park and an industrial property in Penang by 2Q24 and 3Q24 onwards. Our earnings forecasts and DDM-TP of MYR1.60 (Ke:8.1%) are intact.

Analyst:
Nur Farah Syifaa
nurfarahsyifaa.mohamadfuad@maybank-ib.com

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by Kenanga
Outperform – TP RM1.65

“A Soft Patch in 1QFY24"

SUNREIT’s 1QFY24 results met expectations. Its 1QFY24 core net profit declined 10% YoY following an asset disposal coupled with higher marketing expenses. While keeping our forecasts relatively unchanged, we trim our dividend payout forecasts slightly to reflect higher capex. We reduce our TP by 4% to RM1.65 (from RM1.72) but keep our OUTPERFORM call.

Analyst:
Clement Chua
clement.chua@kenanga.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by HLIB
Buy (Maintain) – TP RM1.94

“Brighter prospects ahead"

Sunway REIT’s 1Q24 core net profit of RM82.0m (+11.7% QoQ, -10.4% YoY) was within ours and street estimates at 23% each. The group’s outlook remains positive as (i) the retail segment will stay strong on the back of higher rental reversions post completion of AEIs at Sunway Pyramid and Sunway Carnival Mall along with higher disposable incomes supporting tenant sales, while (ii) the hotel segment will continue to benefit from improving tourist arrivals. On top of the recently completed six hypermarkets acquisition, should the remaining two ongoing purchases be completed by 3Q24, management foresees a stronger FY24 showing. Maintain BUY with a higher TP of RM1.94 based on FY25 DPU on targeted yield of 5.3%.

Analyst:
Tan Je Jyne
JJTan@hlib.hongleong.com.my

$SUNREIT / 5176 (SUNWAY REAL ESTATE INVESTMENT TRUST)
Research by CGS
Add (no change) – TP RM1.77

“Offers dividend yields of 6.2-6.6%"

■ Maintain Add on anticipation of improved consumer spending and increased occupancy. TP higher at RM1.77. FY24-26F dividend yields are 6.2-6.6%.
■1Q24 core net profit lower yoy on absence of rental income from Sunway Medical Centre but within expectation at 24% of our FY24F forecast.
■ Gearing level in ched higher to 0.40x as at end-March 24 (1Q23:0.39x) but was still comfortable, in our view.

Analyst:
CHONG Tjen-San, CFA
tjen-san.chong@cgsi.com

Quarterly rpt on consolidated results for the financial period ended 31/03/2024

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD