SUNREIT: REIT Sector Sees Robust Earnings Growth, Analysts Raise Target Price

A prominent Real Estate Investment Trust (REIT) announced a stellar financial performance for fiscal year 2025, significantly exceeding market expectations. The trust’s realised net profit surged by an impressive 31.2% year-on-year to RM451.2 million, surpassing both the investment bank’s full-year forecast by 106% and the market consensus by 107%. This strong showing was primarily attributed to robust rental income across its diversified portfolio.

The trust declared a final income distribution of 4.82 sen per unit, bringing the total DPU for FY25 to 14.48 sen, which translates to a 5.8% dividend yield based on the last closing price. The outperformance in DPU was also supported by the crystallisation of prior years’ unrealised fair value gains following the strategic disposal of Sunway University & College Campus (SUCC). Overall, net property income (NPI) for FY25 rose 15.5% year-on-year to RM658.0 million.

Performance Highlights

The retail segment was a significant growth driver, with NPI surging 28.7% year-on-year to RM474.0 million. This was bolstered by new rental contributions from recently acquired and opened assets, alongside improved performance at key retail properties following their refurbishment. The hotel segment also demonstrated resilience, with NPI increasing 1.8% year-on-year to RM93.2 million, driven by strong MICE and leisure demand. Furthermore, the industrial and other segments recorded robust growth, seeing NPI rise 52.1% year-on-year due to new rental contributions and higher occupancy rates.

Despite the overall positive results, certain segments experienced mixed performance. The office segment’s NPI declined 8.1% year-on-year to RM47.9 million, primarily due to lower occupancy rates and higher assessment expenses. The services segment also saw a 23.7% year-on-year decline in NPI following the cessation of campus rental income after the SUCC disposal. On a quarter-on-quarter basis, revenue in 4Q25 decreased 3.7%, and realised net profit declined 21.6% due to the absence of campus income and disposal-related gains which had boosted 3Q25 results.

Future Outlook and Strategic Initiatives

Management expresses optimism for the 2026 outlook, anticipating resilient domestic economic growth, strong consumption, ongoing infrastructure development, and increased tourist arrivals under Visit Malaysia 2026. This positive environment is expected to support demand across retail, hotel, and industrial segments. The trust is guiding for mid-single-digit rental reversion at the portfolio level in 2026, building on the 8.5% achieved in FY25.

The balance sheet remains robust, maintaining gearing in the low-40% range and providing approximately RM300 million in debt headroom for future acquisitions. The trust has also allocated around RM300 million for FY26 capital expenditure, primarily for ongoing development projects, including Sunway Pier and a new hotel.

Following the strong financial performance and positive outlook, analysts at TA Securities have revised their target price for the trust to RM0.25, representing a 25.0% upside. The investment bank has issued a BUY recommendation, reflecting confidence in the trust’s quality portfolio and resilient earnings growth potential.