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Sunway REIT, A Top Pick Among Peers: Maybank IB

Sunway REIT's 1Q25 performance was driven by full-quarter contributions from assets acquired in 2024 and the successful refurbishment of the Oasis precinct at Sunway Pyramid Mall. The results were slightly above forecast, accounting for 27% of FY25E, while consensus' was in-line. Maybank IB said the outperformance was mainly due to lower-than-expected finance costs. The house maintains its forecast with a BUY call of MYR2.13 (Ke: 7%). SREIT remains Maybank IB's top pick in the M-REIT sector due to its robust retail performance and strong growth potential from recent acquisitions & AEIs. Strong growth led by retail segment 1Q25 core net profit (+20% YoY, +4% QoQ), primarily supported by 23% YoY rise in revenue. Retail NPI surged 34% YoY, driven by positive rental reversions and contributions from newly acquired assets, including S. 163 Mall, six hypermarkets, and Mall. Retail occupancy reached a record high of 99%, and the Oasis precinct at Mall achieved full occupancy, with rents doubling. However, hospitality revenue dropped 16% YoY, impacted by the Ramadan festivity, but this is expected to normalise from 2Q25. Office NPI also declined 11% YoY due to tenant relocations, though backfilling efforts are outlook; upside from Retail and Hospitality The house said it remaims optimistic on SREIT's outlook, supported by the full-year contributions from its recent acquisitions, ongoing AEIs such as phase 2 of Mall, and development projects at Sunway Pier. The industrial segment continues to provide stable income, while hospitality is expected to recover in 2Q25 with a pick-up in MICE activity and leisure demand. Management is actively addressing tenant cost pressures related to SST and focussing on tenant retention, particularly in the office segment, while maintaining a focus on high occupancy and scalable growth in retail. Earnings forecasts unchanged Maybank IB maintained it earnings forecast and believes finance cost will increase as asset acquisitions materialise in the coming quarters. The proposed disposal of the Sunway University and College campus (MYR613m) is targeted for completion in 2H25, subject to state approval, while the acquisition of AEON Mall Seri Manjung is expected to be completed by Aug Post-completion of both transactions, gearing is expected to stabilise at around 40% (1Q25: 42%) Related