Sunway REIT
(5176 | SREIT MK) Main | REIT
2QFY25 Results Review
Earnings Lifted by Retail Division
1HFY25 earnings within expectations. Sunway REIT 1HFY25 core net income of RM206.7m came in within expectations, making up 54% and 52% of our and consensus full year estimates respectively. Distribution per unit of 5.68sen is announced for 1HFY25.
Lower sequential earnings due to high base effect. On a sequential basis, 2QFY25 core net income eased marginally to RM102.4m (-1.9%qoq), in line with lower topline (-3.4%qoq). The slight drop in earnings were mainly due to lower contribution from retail division which cushioned by the marginally higher contribution from hotel division. Net property income (NPI) of retail division eased by -2.3%qoq mainly due to lower income from Sunway Pyramid Mall as retail business normalised from high base in 1QFY25. Note that retail industry was boosted by festive season in 1QFY25. Meanwhile, hotel division saw recovery in NPI (+4.1%qoq) as earnings in 1QFY25 were softer during Ramadan month.
Earnings lifted by retail division. On a yearly basis, 2QFY25 earnings jumped to RM102.4m (+29.7%yoy). That brought cumulative earnings in 1HFY25 higher at RM206.7m (+24.6%yoy) which was in line with higher topline (+21.5%yoy). The decent earnings growth was spurred by higher contribution from retail division which offset the weaker contribution from hotel and office divisions. NPI of retail division saw decent growth of 33.4%yoy mainly due to higher rental from Sunway Pyramid Mall and contribution from newly acquired assets. Notably, rental income of Sunway Pyramid Mall was supported by positive rental reversion and reconfiguration of Oasis wing which lifted rental rate. On the other hand, NPI of hotel division was weaker (-16.6%yoy) mainly due to softer leisure demand which led to decline in average occupancy rate from 62% to 60%.
Maintain Neutral with an unchanged target price of RM2.10. We make no changes to our earnings forecast for FY25/26/27F. We also maintain our TP for Sunway REIT at RM2.10, based on dividend discount model. While we remain positive on earnings outlook for Sunway REIT which will be mainly underpinned by solid contribution from retail division. Nevertheless, upside is limited following recent increase in share price. Hence, we maintain our NEUTRAL call on Sunway REIT. Distribution yield is estimated at 4.7%.
Sunway REIT: 2QFY25 RESULTS SUMMARY
| FYE Dec (RM’m, unless otherwise stated) | Quarterly Results | Cumulative Results | |||
|---|---|---|---|---|---|
| 2QFY25 | %YoY | %QoQ | 1HFY25 | %YoY | |
| Gross Revenue | 211.4 | 20.4% | -3.4% | 430.3 | 21.5% |
| Net Rental Income (NRI) | 154.9 | 19.8% | -1.5% | 312.1 | 20.1% |
| Net Investment Income | 187.1 | -5.3% | 16.7% | 347.4 | 3.9% |
| Net Income | 129.4 | -10.8% | 24.0% | 233.7 | 0.7% |
| Core Net Income (CNI) | 102.4 | 29.7% | -1.9% | 206.7 | 24.6% |
| Realised EPU (sen) | 3.8 | -10.8% | 24.0% | 6.8 | 0.7% |
| Core EPU (sen) | 3.0 | 29.7% | -1.9% | 6.0 | 24.6% |
| Gross DPU (sen) | 5.7 | 21.9% | N/A | 5.7 | 21.9% |
Source: Company, MBSBR
FINANCIAL SUMMARY
| Profit or Loss (RM’m) | |||||
|---|---|---|---|---|---|
| 2023A | 2024A | 2025E | 2026F | 2027F | |
| Gross Revenue | 716 | 767 | 803 | 823 | 843 |
| Net Rental Income | 527 | 570 | 615 | 629 | 643 |
| Net Investment Income | 527 | 746 | 621 | 635 | 648 |
| Net Income | 338 | 525 | 378 | 402 | 428 |
| Core Net Income | 338 | 351 | 383 | 402 | 428 |
| Core EPU (sen) | 9.9 | 10.3 | 11.2 | 11.7 | 12.5 |
| Core PER (x) | 21.8 | 21.0 | 19.2 | 18.3 | 17.2 |
| NAV/unit (RM) | 1.61 | 1.71 | 1.73 | 1.74 | 1.75 |
| P/NAV (x) | 1.33 | 1.25 | 1.24 | 1.23 | 1.23 |
| Cash Flow (RM’m) | |||||
|---|---|---|---|---|---|
| 2023A | 2024A | 2025E | 2026F | 2027F | |
| Cash flows from operating activities | |||||
| Cash Receipt from Customers | 727 | 771 | 811 | 831 | 851 |
| Net cash from operating activities | 446 | 544 | 630 | 651 | 672 |
| Cash flows from investing activities | |||||
| Subsequent Expenditure of Inv Properties | -200 | -313 | -170 | -157 | -10 |
| Net cash used in investing activities | 135 | -1210 | -164 | -148 | 3 |
| Cash flows from financing activities | |||||
| Net cash from/(used in) financing activities | -407 | 530 | -475 | -586 | -589 |
| Net increase/(decrease) in cash and cash equivalents | 174 | -136 | -9 | -83 | 85 |
| Cash and cash equivalent at 1 January | 251 | 425 | 290 | 280 | 198 |
| Cash and cash equivalent at 1 December | 425 | 290 | 280 | 198 | 283 |
| Balance Sheet (RM’m) | |||||
|---|---|---|---|---|---|
| 2023A | 2024A | 2025E | 2026F | 2027F | |
| Investment Properties | 8,912 | 10,385 | 10,395 | 10,405 | 10,415 |
| Total non-current assets | 8,990 | 10,472 | 10,409 | 10,419 | 10,429 |
| Cash | 425 | 290 | 280 | 198 | 283 |
| Other Assets | 123 | 41 | 131 | 267 | 195 |
| Total Assets | 9,539 | 10,803 | 10,820 | 10,883 | 10,907 |
| LT Borrowings | 2,000 | 2,730 | 2,800 | 2,762 | 2,717 |
| ST Borrowings | 1,637 | 1,737 | 1,789 | 1,843 | 1,898 |
| Other Liability | 386 | 464 | 302 | 308 | 313 |
| Total Liability | 4,023 | 4,931 | 4,891 | 4,912 | 4,928 |
| Unitholders’ capital | 3,434 | 3,434 | 3,434 | 3,434 | 3,434 |
| Other Equity | 2,082 | 2,438 | 2,495 | 2,537 | 2,546 |
| Total Equity | 5,516 | 5,872 | 5,929 | 5,971 | 5,979 |
| Equity + Liability | 9,539 | 10,803 | 10,820 | 10,883 | 10,907 |
| Profitability Margin | |||||
|---|---|---|---|---|---|
| 2023A | 2024A | 2025E | 2026F | 2027F | |
| Profitability Margins | 73.6% | 97.3% | 77.3% | 77.1% | 76.9% |
| Net Investment Income margin | 47.3% | 45.8% | 47.7% | 48.8% | 50.7% |
| Core net income margin | 6.6% | 6.8% | 7.2% | 7.4% | 7.8% |
| ROE | 3.6% | 3.5% | 3.5% | 3.7% | 3.9% |
MBSB RESEARCH (formerly known as MIDF RESEARCH) is part of MBSB Investment Bank Berhad (formerly known as MIDF Amanah Investment Bank Berhad)
(Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
This report has been prepared by MBSB Investment Bank Berhad (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) 197501002077 (24878-Χ).
It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD). The directors, employees and representatives of MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) may have an interest in any of the securities mentioned and may benefit from the information herein. Members of the MBSB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose.
MBSB INVESTMENT BANK (formerly known MIDF INVESTMENT BANK): GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
- BUY
- Total return is expected to be >10% over the next 12 months.
- TRADING BUY
- The stock price is expected to rise by >10% within 3 months after a Trading Buy rating has been assigned due to positive news flow.
- NEUTRAL
- Total return is expected to be between -10% and +10% over the next 12 months.
- SELL
- Total return is expected to be <-10% over the next 12 months.
- TRADING SELL
- The stock price is expected to fall by >10% within 3 months after a Trading Sell rating has been assigned due to negative news flow.
SECTOR RECOMMENDATIONS
- POSITIVE
- The sector is expected to outperform the overall market over the next 12 months.
- NEUTRAL
- The sector is to perform in line with the overall market over the next 12 months.
- NEGATIVE
- The sector is expected to underperform the overall market over the next 12 months.
ESG RECOMMENDATIONS* – source Bursa Malaysia and FTSE Russell
- ☆☆☆☆
- Top 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- ☆☆☆
- Top 26-50% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- ☆☆
- Top 51%- 75% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- ☆
- Bottom 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
* ESG Ratings of PLCs in FBM EMAS that have been assessed by FTSE Russell in accordance with FTSE Russell ESG Ratings Methodology
