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Investing.com - UBS has initiated coverage on Sunway REIT (KLSE:SREIT) with a Buy rating and a price target of MYR2.44, citing expectations for strong distribution per unit (DPU) growth.
The investment bank forecasts a 2024-27 DPU compound annual growth rate of 6.9%, which would represent a historical high for the Malaysian real estate investment trust. This growth is expected to be driven largely by recent acquisitions made by the company.
UBS notes its DPU growth estimate is slightly below the consensus forecast of 7.2%, as the bank assumes stronger retail rent reversions will contribute to Sunway REIT’s performance. The price target implies a 5.0% dividend yield for 2027, approximately 1.5% above Malaysia’s 10-year government bond yields.
The analyst report highlights improving retail mall fundamentals and healthy funding costs as positive factors for Sunway REIT. UBS also expresses optimism that further acquisitions could lead to additional DPU upgrades and help narrow the stock’s illiquidity premium.
The bank views current dividend yield spreads, which are near historical mean levels, as attractive and indicative that potential upside for the stock is not fully priced into current valuations.
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