Summary & Outlook

• Stay BUY, new DDM-derived MYR2.42 TP from MYR2.13, 13% upside and 6% yield. Sunway REIT’s 1H25 results met expectations. We continue to like the REIT for its solid growth prospects underpinned by active acquisition strategy and continuous asset enhancement initiatives. We see further upside despite its share price rally due to the wider yield spread (230bps) post interest rate cut and the growing investors’ interest in domestic defensive assets. This report marks the transfer of coverage to Tai Yu Jie.
• Within expectations. SREIT’s 1H25 core profit of MYR200.9m (+21.1% YoY) met 49% and 51% of our and Street’s full-year estimates. 2Q25 DPU came to 5.7 sen (2Q24: 4.7 sen), while 2Q25 gearing stood at 41% (2Q24: 44%).
• Results review. YoY, 1H25 revenue grew 21.5% to MYR430.3m – driven by contributions from newly acquired properties in 2024 (Sunway 163 Mall, Sunway Kluang Mall, and six hypermarkets), as well as higher revenue from Sunway Pyramid Mall following the opening of its Oasis Wing in Nov 2024. That said, 1H25 NPI margin contracted 0.8ppts to 72.5%, likely due to higher utilities and maintenance expenses. QoQ, 2Q25 revenue dipped slightly by 3.4% to MYR211.4m, likely due to softer seasonality in the absence of festive periods. 2Q25 core profit rose 3.8% QoQ to MYR102.3m due to higher interest income from larger cash balances – mainly advance rentals ahead of sales & service tax (SST) implementation.
• Outlook. We expect 3Q25 retail sales (turnover rent: 10-15% of rental income) to remain seasonally subdued in the absence of major festive periods, although this should be partly offset by the recently declared additional September public holiday and continued government measures to spur consumer spending. Despite the SST expansion, we forecast high single-digit retail rental reversions in FY25, supported by full occupancy and strong landlord bargaining power following asset enhancement efforts. In addition, the full-year contribution from 2024 acquisitions is set to drive a robust FY25F (+13.1%) profit growth, which should offset the soft hotel and office segments from rising competition. Meanwhile, the active property development activities of SREIT’s sponsor Sunway (SWB MK, BUY, TP: MYR5.81) should provide a healthy pipeline of potential acquisition opportunities to drive inorganic growth.
• Forecast and ratings. Post results, we maintain our forecasts but raise our TP to MYR2.42 after updating our cost of equity (CoE) assumption (from 7.6% to 6.8%) to reflect a revised beta and a lower risk-free rate following the recent rate cut. Our TP implies a FY26F yield of 5%, offering a spread of 160bps over the 10-year Malaysian Government Bond yield – in line with other retail REITs under our coverage. Key risks: Lower-than-expected occupancy and rental reversions, and longer-than-expected delays in acquisitions.

Share Performance (%)

Forecasts and Valuation

Emissions And ESG

Trend analysis: Total emissions increased by 11% from FY23 with the addition of new buildings into its portfolio.

Latest ESG-Related Developments

• Has an internal carbon pricing framework at MYR15 per tonne of CO2 emitted.
• The first M-REIT to implement a Green Lease Partnership programme.
• Was excluded from FTSE Indices, including FTSE4Good because of low liquidity trading volume.
• On Oct 2024, Sunway REIT completed its maiden issuance of MYR500m sustainability-linked rated perpetual securities.
• Extended green lease clauses to its “industrials and others” segment.

ESG Unbundled

Overall ESG Score: 3.2 (out of 4)
Last Updated: 14 May 2025

E Score: 3.3 (EXCELLENT)
Sunway REIT’s buildings strive for green certification standards through sustainable refurbishment practices, and supports clean energy use by providing charging bay facilities for electric vehicles – effectively reducing almost 50,000 tonnes of CO2 emission, with water consumption gradually decreasing over the years.

S Score: 3.0 (GOOD)
In addition to the many benefits (care for nursing mothers, childcare subsidy) for employees of the Manager, training and engagement are also prioritised. Safety of employees is also ensured by the proper hazard identification, risk assessment, and incident investigation. Community enrichment is also of utmost importance.

G Score: 3.0 (GOOD)
A diverse and skilled board comprising 57% independent directors – 43% of whom are female. The tenure of an independent director is capped at 9 years, and the details of remuneration in the annual report are on a named basis.

Financial Exhibits

Financial summary

Valuation metrics

Income statement (MYRm)

Cash flow (MYRm)

Balance sheet (MYRm)

Key metrics

Results At a Glance

Figure 1: SREIT’s results summary

Figure 2: SREIT’s segmental revenue

Figure 3: SREIT’s segmental NPI

Recommendation Chart