RHB upgrades Sunway Reit to 'Buy' on attractive valuation, growth prospects

KUALA LUMPUR: RHB Research has upgraded its recommendation for Sunway Real Estate Investment Trust (Reit) from 'Neutral' to 'Buy' after its results for the June-month period met expectations.

The firm said Sunway Reit's nine-month earnings of RM349 million met 75 per cent of the firm's full-year forecast and 76 per cent of the consensus' estimates.

"Following its 20 per cent share price derating over the past six months, we see an attractive entry opportunity – backed by its proven asset enhancement initiative (AEI) track record and ability to unlock further growth through synergies across its integrated malls, hotels, and offices," it said in a note.

The firm sees improving medium-term growth prospects, supported by a pipeline of targeted AEIs and opportunities to enhance rental productivity across existing assets.

Upcoming initiatives include the phased reopening of Sunway 163 Mall from December, alongside additional AEIs at Sunway Pyramid targeted for the first quarter of 2027.

"We take comfort in management's established execution track record, with Sunway Carnival's RM360 million refurbishment translating into strong NPI growth, while Sunway Pyramid's Oasis reconfiguration showed its ability to unlock higher rents from underutilised space," it said.

RHB Research maintained its earnings forecasts for the company for the financial year 2026 (FY26) through FY28 but trimmed its target price to RM2.35.

In a separate note, CIMB Securities Sdn Bhd kept its "Buy" call on the stock with a lower target price of RM2.50 after raising its risk-free rate assumption to 4.10 per cent, resulting in a higher cost of equity.

The firm said Sunway Reit's nine-month earnings were in line at 76 per cent of the firm's full-year estimate.

"We expect earnings to strengthen sequentially in the fourth quarter, supported by stronger year-end leisure travel demand for the hotel segment, festive-driven retail spending and continued positive rental reversions across the retail portfolio."