· 1Q25 DPU reversed its downward trend, rising 3.4% YoY to 1.56 Singapore cents, in line with our forecast and forming 25% of FY25e estimates. The YoY growth was driven by S$2.5mn in finance cost savings, a 176.9% surge in Suntec Convention NPI, and resilient rental reversions in Singapore (Office: 8.0%, Retail: 10.3%).
· SUN remains committed to its S$100mn divestment target for FY25e, with pricing expected to be 20–25% above book value. We anticipate valuations for overseas assets, particularly in the UK, to remain stable in FY25e, except for the Melbourne office market, which may face downward pressure due to negative net absorption.
· SUN is likely to retain its Managed Investment Trust (MIT) status, following the reduction of Gordon Tang (9.9%) and Celine Tang’s (9.1%) ownership to below 10% each. This enables Australia's effective tax rate to revert from 45% to 10–15%, pending regulatory confirmation. Following the recent share price performance, we maintain our FY25e forecasts and upgrade our recommendation to BUY. Our DDM-TP remains unchanged at S$1.33, with FY25e/26e DPU estimates of 6.09/6.45 cents. Given the cautious sentiment among retailers, we expect high single-digit rental reversions for the retail segment and mid-single-digit reversions for the office segment in FY25e. SUN is trading at an FY25e dividend yield of 5.3% and P/NAV of 0.55x.
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