4QFY15 earnings met expectations. Maintain NEUTRAL with a revised DDM-based TP of MYR1.64 (7% upside). SunREIT remains cautious over the short term on the prospects of its hospitality and office segments due to softer demand and lower occupancy rate. That said, we expect this should be offset by the recently-opened Sunway Putra Mall and the full opening of Sunway Putra Place.

Within expectations. Sunway REIT’s (SunREIT) 4QFY15 (Jun) core profit of MYR56.7m (-3.8% QoQ, +1.1% YoY) brought FY15 core profit to MYR242m (+4.3% YoY). This came in line at 98%/95% of our/consensus full-year forecasts. A DPU of 2.05 sen was declared for the quarter, which adds up to 8.73 sen or 99% of our full-year DPU forecast of 8.86 sen. 4Q earnings were underpinned by healthy rental reversions from the retail segment. However, this was offset by lower contributions from the hospitality and office segments, which were hit by softer demand for luxury hotel and lower occupancy respectively. SunREIT also recognised a maiden contribution from Sunway Putra Mall this quarter – which was opened in May 2015.

Briefing highlights. Management shared that the refurbishment for Sunway Putra Tower has just been completed back in July. Currently, management is concentrating on refurbishing Sunway Putra Hotel which is due for completion by the end of the year. Additionally, the REIT also mentioned that it has 82% committed tenants for Sunway Putra Mall. We think that the occupancy rate will reach 90% by 1HFY16. Meanwhile, the office and hospitality sectors are still facing headwinds. That said, we think that revenue from its retail segment should help to offset lower contributions from these two segments due to stable rental reversions of its retail malls and the positioning of the malls as one of the preferred malls in their respective areas.

Forecasts and risks. We made no changes to our earnings forecastsand introduce our FY18 numbers. Key risks to our earnings forecasts include: i) low occupancy rates, and ii) delay in the opening of Sunway Putra Place.

Maintain NEUTRAL. We retain our NEUTRAL call with a revised DDMbased TP of MYR1.64 (from MYR1.55, 7% upside), after we roll forward our valuations to FY17. Despite the current headwinds in both office and hospitality segments, we think that the full opening of Sunway Putra Place should help mitigate lower contributions from both segments.