Sunway REIT: A Strong Finish to FY24 and Promising Prospects

Sunway REIT concluded FY24 on a high note with a core net profit of RM351.4 million, achieving 104% of CGS International’s forecast and 100% of Bloomberg consensus estimates. This marks a 12% year-on-year growth, driven by contributions from newly acquired assets, such as six Sunway REIT hypermarkets and Sunway 163 Mall. The REIT also declared a final dividend per unit (DPU) of 5.34 sen, culminating in a full-year DPU of 10.0 sen, an 8% increase year-on-year.

Key Highlights from FY24

• Retail Portfolio: Achieved mid-teens rental reversion, supported by robust tenant sales and higher average rental rates. The opening of Sunway Pyramid Mall’s Oasis Wing significantly boosted rental income, with rental rates more than doubling post-launch.
• New Acquisitions: The RM158 million acquisition of Kluang Mall was completed in December 2024, targeting a net property income (NPI) yield of approximately 7.0%. Another acquisition, Aeon Mall Seri Manjung, valued at RM138 million, is expected to post maiden contributions by 2HFY25 with a 6.5% NPI yield.
• Gearing: The gearing ratio stood at a manageable 0.41x as of December 2024. Management aims to maintain gearing below 45% in the near term, with the possibility of a placement for larger acquisitions.

Outlook and Recommendations

Sunway REIT is poised for continued earnings growth through FY25F-27F, supported by new asset contributions and rising revenue from its retail and hotel segments. The REIT’s target price (TP) has been slightly adjusted to RM2.03, reflecting a dividend yield of 5.7% in FY25F. Downside risks include lower occupancy rates and negative rental reversions, while re-rating catalysts include increased retail sales and higher hotel occupancy rates. Sunway REIT remains an Add recommendation.

Axis REIT: Steady Growth Amid Challenges

Axis REIT continues to demonstrate resilience in a challenging market, with a target price of RM2.01, reflecting an 11.7% upside potential. The REIT’s price-to-earnings (P/E) ratio for CY24F stands at 18.0x, with a slight decline to 16.4x in CY25F. However, it faces a negative compounded annual growth rate (CAGR) of 4.2% over two years.

Key Financial Metrics

• Dividend Yield: Projected at 6.4% for CY24F and 6.9% for CY25F, providing a steady income stream for investors.
• Return on Equity (ROE): Maintained at 5.6% for CY24F, improving to 6.1% in CY25F.

Outlook and Recommendations

Despite a slight contraction in growth, Axis REIT remains an attractive option for investors seeking stable returns. The REIT is rated as an Add due to its consistent dividend yield and strong operational fundamentals.

Capitaland Malaysia Trust: Strong Upside Potential

Capitaland Malaysia Trust (CLMT) emerges as a promising investment with a TP of RM0.82, offering a robust 20.6% upside. The REIT’s projected P/E ratio stands at 14.7x for CY24F, improving to 13.3x in CY25F, with a strong CAGR of 7.1% over two years.

Key Financial Metrics

• Dividend Yield: Estimated at 6.5% for CY24F and 7.1% for CY25F.
• ROE: Projected to remain stable at approximately 6.5% across both years.

Outlook and Recommendations

With strong growth prospects and attractive dividend yields, CLMT is positioned as a solid investment opportunity. It is rated as an Add for its potential to deliver substantial returns.

IGB REIT: Moderate Growth with Stable Returns

IGB REIT maintains a balance of moderate growth and stable returns, with a TP of RM2.21, reflecting a 2.3% upside. The REIT’s P/E ratio is projected at 21.1x for CY24F, declining slightly to 19.2x in CY25F, with a modest CAGR of 4.0%.

Key Financial Metrics

• Dividend Yield: Estimated at 5.0% for CY24F and 5.4% for CY25F.
• ROE: Consistent at approximately 13.6% for CY24F, declining to 9.5% in CY25F.

Outlook and Recommendations

While growth remains moderate, IGB REIT offers stability and consistent returns for investors. It is rated as a Hold due to its limited upside potential.

KLCC Stapled Group: A Neutral Performer

KLCC Stapled Group maintains a neutral outlook with a TP of RM8.15, slightly below its current price of RM8.18. The REIT’s P/E ratio stands at 18.6x for CY24F, improving marginally to 17.8x in CY25F, with a modest CAGR of 5.4%.

Key Financial Metrics

• Dividend Yield: Estimated at 5.0% for CY24F and 5.3% for CY25F.
• ROE: Consistent at approximately 5.1% for CY24F and 5.4% for CY25F.

Outlook and Recommendations

Given its limited growth prospects, KLCC Stapled Group is rated as a Hold, reflecting its stable but neutral performance.

Pavilion REIT: Promising Upside with Strong Growth

Pavilion REIT offers compelling growth potential with a TP of RM1.78, reflecting a 17.9% upside. The REIT’s P/E ratio is projected at 16.9x for CY24F, improving to 14.9x in CY25F, with a solid CAGR of 6.7%.

Key Financial Metrics

• Dividend Yield: Estimated at 5.5% for CY24F and 6.3% for CY25F.
• ROE: Improving from 6.6% to 7.4% over the two years.

Outlook and Recommendations

With strong growth potential and attractive returns, Pavilion REIT is rated as an Add, making it a solid choice for investors.

Sentral REIT: Stability Amid Modest Growth

Sentral REIT offers stability with modest growth, maintaining a TP of RM0.86, reflecting a 6.8% upside. The REIT’s P/E ratio for CY24F is projected at 13.3x, increasing slightly to 13.7x in CY25F, with a CAGR of 3.4%.

Key Financial Metrics

• Dividend Yield: Projected at 7.4% for CY24F, slightly decreasing to 7.2% for CY25F.
• ROE: Estimated at 4.3% for CY24F, reducing to 4.1% in CY25F.

Outlook and Recommendations

Sentral REIT’s stability and consistent dividends make it a reliable choice for income-focused investors. It is rated as a Hold.