Date: October 2, 2024
Broker: Maybank Investment Bank Berhad

Overview
Sunway REIT (SREIT MK) is one of Malaysia’s largest diversified REITs, with a portfolio spanning retail, office, hospitality, and industrial segments. Its assets are strategically located in prime areas, particularly its flagship property, Sunway Pyramid Mall, which contributes significantly to the REIT’s income.

Stock Performance and Target Price

• Current Price (CP): MYR1.73
• Target Price (TP): MYR1.77
• Upside: 8%
• Market Capitalization: USD1,423 million
  Sunway REIT is rated as a BUY, with a projected upside of 8%. This reflects confidence in its ability to deliver stable income supported by a well-diversified asset portfolio.

Earnings Forecast and Dividend Yields

• 2024 Core Earnings Growth: 19.9%
• 2025 Core Earnings Growth: 16.6%
• 2024 Dividend Yield: 5.0%
• 2025 Dividend Yield: 6.0%

Sunway REIT is expected to maintain healthy earnings growth in 2024 and 2025, driven by robust performance across its portfolio, particularly in the retail and hospitality sectors. The REIT also offers competitive dividend yields, appealing to investors seeking stable income.

Occupancy Rates of Key Properties
Sunway REIT maintains high occupancy rates across its key properties, contributing to its consistent earnings:

• Sunway Pyramid Mall: 97%
• Sunway Carnival Mall: 91%
• Sunway Putra Mall: 93%
• Menara Sunway: 96%
• The Pinnacle Sunway: 100%

These strong occupancy rates reflect the demand for well-located retail and office space, which underpins Sunway REIT’s stable revenue streams.

Retail Segment Outlook
Sunway REIT’s retail properties, particularly Sunway Pyramid Mall, are located in prime areas and continue to attract high foot traffic and tenant demand. The retail segment’s resilience is further bolstered by the improving retail environment in Malaysia, which is projected to see a 4% growth in sales in 2024. This positions Sunway REIT well to benefit from rising consumer spending and tourist arrivals.

Debt Profile and Financing Costs

• Total Debt: MYR4.324 billion
• Floating Rate Debt: 77% of total debt
• Gross Gearing: 44%

Sunway REIT has a relatively high proportion of floating rate debt at 77%, which exposes it to potential interest rate volatility. However, its diversified portfolio and strong earnings are expected to mitigate some of the risks associated with rising financing costs.

Investment Thesis
Sunway REIT’s diverse portfolio, which spans high-performing retail, office, and hospitality assets, makes it a resilient investment. Its flagship property, Sunway Pyramid Mall, continues to be a key contributor to earnings, and the REIT’s attractive dividend yields provide a compelling reason for investors to hold the stock. Despite exposure to floating rate debt, its strong earnings growth outlook and high occupancy rates position Sunway REIT as a solid performer in the Malaysian REIT market.

This analysis summarizes Sunway REIT’s position and performance as of October 2, 2024.