- Strong FY2024 Performance: Sunway REIT reported a core net profit of RM351 million for FY2024, a 12% increase year-on-year, driven by contributions from newly acquired assets.
- Continued Earnings Momentum: Acquisitions such as Kluang Mall and Aeon Mall Seri Manjung are expected to further bolster Sunway REIT’s income streams in FY2025.
- Prudent Gearing Management: Sunway REIT’s debt remains manageable, with a gearing ratio of 0.41x as of December 2024.
Sunway Real Estate Investment Trust (REIT) (KLSE: 5176) is set to build on its momentum heading into fiscal year 2025 (FY2025), supported by strategic acquisitions. The REIT’s diversified portfolio, strong retail presence, and prudent financial management position it for resilient earnings growth and an attractive dividend yield for investors.
Sunway REIT offers unitholders a diversified portfolio that spans retail, hospitality, office, education, and industrial properties across Greater Kuala Lumpur, Penang, Johor, and Perak. Its properties are primarily in Sunway City where its flagship retail property, Sunway Pyramid Mall, is located.
As of February 4, 2025, major shareholders include Sunway Bhd (40.9%), the Employees Provident Fund (EPF) (16.2%), and the Kumpulan Wang Persaraan (Diperbadankan) (KWAP) (5.9%).
Acquisitions Driving Future Growth
Sunway REIT has been actively expanding its portfolio through acquisitions that strengthen its retail presence and income streams. In FY2024, the REIT’s core net profit increased by 12% year-on-year, primarily due to contributions from newly acquired assets, including six hypermarkets (starting April 30, 2024) and Sunway 163 Mall (starting October 9, 2024).
Moving forward, Sunway REIT’s upcoming new assets include:
- Kluang Mall: Completed in December 2024 for RM158 million, it will begin contributing to earnings in FY2025, with a projected net property income (NPI) yield of around 7%.
- Aeon Mall Seri Manjung: This acquisition, announced in January 2025 for RM138 million, is expected to be completed by the second half of FY2025, with an initial NPI yield of 6.5%.
Retail Portfolio Boosting Earnings
Sunway REIT’s retail segment generates the largest portion of revenue. The market recovery and Sunway Pyramid Mall’s expansion are expected to drive higher revenue in FY2025.
- Strong Rental Reversion: In FY2024, its retail portfolio saw resilient tenant sales and strong rental reversion. The opening of the Oasis Wing at Sunway Pyramid Mall on November 1, 2024, saw rental rates double post-launch.
- Recovery in Tourism and Spending: Sunway REIT’s hotel segment saw the average occupancy rate rise from 64% to 65%, while room rates improved by 3% for FY2024. The higher number of tourist arrivals and pick-up in private consumption is anticipated to improve earnings for the REIT’s hotel and retail segments in FY2025.
Financial Prudence Ensuring Stability
Sunway REIT’s financial health remains stable, with a gearing ratio of 0.41x as of December 2024.
- Gearing Ratio: The REIT is committed to maintaining its gearing ratio below 45% in the near term, which provides flexibility to pursue further acquisitions.
- Future Growth Plans: The REIT is open to potential placements if larger acquisitions arise, which will further bolster its ability to seize growth opportunities.
What Investors Can Do Now
For investors holding Sunway REIT, maintaining or adding to positions is recommended, especially with anticipated growth in FY2025. We estimate a 5.65% dividend yield for Sunway REIT’s FY2025, making it an appealing option for income-seeking investors.
Last week, the REIT proposed an income distribution with a distribution per unit (DPU) of 5.34 sen for the second half of FY2024. The ex-date is February 18, 2025, and the payment date is set for February 28, 2025.
While risks such as lower occupancy rates or negative rental reversions exist, Sunway REIT’s diversified portfolio and sound management practices are expected to mitigate these challenges.
Disclaimer: ProsperUs Manager of Content, Hailey Chung, does not own shares of the company.
Reference
CGSI Note | Sunway REIT | Feb 4, 2025
