CIMB Research expects Sunway-REIT’s earnings this year to grow by 11.6% year-on-year.
PETALING JAYA: Sunway Real Estate Investment Trust
(Sunway-REIT), whose net profit surged 55% last year, is expected to see continued earnings growth momentum this year.
CGS International Research (CGSI Research) said this year’s earnings will be driven by full-year contributions from new assets and higher revenue from Sunway Pyramid Mall.
Sunway-REIT has acquired nine retail assets since last year and has also undertaken asset-enhancement initiatives at Sunway Pyramid Mall.
The popular mall’s Oasis Wing was opened to the public last November.
CIMB Research expects Sunway-REIT’s earnings this year to grow by 11.6% year-on-year.
The research house said the growth will be on the back of the record-high RM899mil in acquisitions completed in 2024, improvements in occupancy rates and rental revisions.
In addition, the completion of asset enhancements in Sunway Pyramid Mall and Sunway Carnival Mall will also provide a boost to earnings.
Carnival Mall’s upgrades are expected to be completed by mid-2025.
“Sunway-REIT started 2025 with the announcement of its AEON Mall Seri Manjung acquisition on Jan 21; this could lift our 2025 to 2026 earnings projections by 0.3% to 0.7%.
“Although the earnings accretion from this asset is not significant, estimated at 1.4% of the group’s total property value, we view the acquisition positively, owing to its fair purchase consideration at 4.8% below market value and the resulting expansion and diversification of Sunway-REIT’s earnings base,” CIMB Research said.
Maybank Investment Bank Research, which upgraded its rating on the REIT to “buy”, has lowered its earnings forecast for 2025 and 2026 by 7.7% and 8.4% respectively, to factor in the distribution to perpetual note holders.
This is following the issuance of a RM500mil perpetual note in October 2024.
“We made marginal tweaks to our 2025 to 2026 net profit forecasts after accounting for actual 2024 financials. With expected acquisitions ahead, we estimate net gearing to rise to 43% in 2025, from 41% as of end-December 2024,” the research house said.
With the likely increase in net gearing, RHB Research expects Sunway-REIT to fund its next major acquisition partially via equity as it nears the 45% gearing level.
This could provide an opportunity to increase the stock’s liquidity.
Commenting on the REIT’s hospitality segment, RHB Research said the segment recorded 10% higher revenue in 2024, despite just recording a slight improvement in occupancy rates to 64%.
The higher revenue was achieved thanks to the increase in meetings, incentives, conferences, and exhibitions events.
“As room rates are already high, we think growth for the segment moving forward would come from higher occupancy rates as Malaysia gears up for Visit Malaysia 2026.”
The research house also noted that Sunway-REIT’s office segment was flat year-on-year as higher occupancy rates in Menara Sunway and Sunway Tower offset the loss of a tenant in Sunway Putra Tower.
As for the retail segment, excluding the newly acquired properties, revenue rose by 5% in 2024.
“The average gross rent grew by 18% boosted by the renovations in Sunway Pyramid and Sunway Carnival, with full-year contributions expected be reflected in 2025.
“We continue to like the REIT for the solid growth prospects from its diversified portfolio, as well as upside from its active acquisition strategy and asset enhancements,” the research house added.
Sunway-REIT is one of the largest diversified REITs in Malaysia with a diverse portfolio located across integrated townships in key locations in Greater Kuala Lumpur, Penang, Johor and Perak.
The REIT’s properties are primarily in Sunway City Kuala Lumpur where its flagship retail property, Sunway Pyramid Mall, is located. Other properties in Sunway City include Sunway Resort Hotel, Sunway Pyramid Hotel, Sunway Lagoon Hotel, Menara Sunway, Sunway Pinnacle and Sunway university and college campus.
Sunway-REIT gained 3.21% to close at RM1.93 yesterday.
