Stock Analysis & Valuation Sunrise Realty Trust, Inc. (SUNS)

• Previous Close: $9.40
• Sector Valuation Confidence Level: Low

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	401.96	4176
Intrinsic value (DCF)	5976.81	63483
Graham-Dodd Method	18.63	98
Graham Formula	4106.87	43590

Strategic Investment Analysis

Company Overview

Sunrise Realty Trust, Inc. (NASDAQ: SUNS) is a residential real estate investment trust (REIT) specializing in the acquisition, development, and management of rental properties in Canada. Founded in 2017, the company focuses on addressing the growing demand for high-quality rental housing by leveraging its professional team’s expertise in investor and landowner collaboration. Sunrise REIT operates in the competitive REIT - Residential sector, emphasizing integrity, operational excellence, and sustainable growth. With a market capitalization of approximately $141.7 million, the company has demonstrated financial stability, reporting $10.6 million in revenue and $6.9 million in net income for the latest fiscal period. Its strong cash position ($184.6 million) and disciplined capital allocation underscore its ability to navigate market fluctuations while delivering consistent dividends ($0.93 per share). As urbanization and housing shortages persist, Sunrise REIT is well-positioned to capitalize on long-term rental market trends.

Investment Summary

Sunrise Realty Trust presents a compelling investment case with its focus on the resilient Canadian rental market, strong balance sheet, and consistent dividend yield. However, its high beta (1.75) suggests elevated volatility relative to the broader market, reflecting sensitivity to interest rate changes and economic cycles. The REIT’s modest revenue base ($10.6 million) and concentrated geographic exposure may limit diversification benefits. Investors should weigh its attractive dividend payout (supported by $6.9 million net income) against risks like rising debt ($198.8 million) and competitive pressures in the residential REIT sector. The lack of capital expenditures indicates a lean operational model, but scalability could be constrained without reinvestment.

Competitive Analysis

Sunrise Realty Trust competes in the fragmented residential REIT sector, where scale and localized expertise are critical. Its competitive advantage lies in its targeted focus on Canadian rental properties, a market with steady demand due to housing shortages and urbanization. The company’s lean operational model (zero capital expenditures in the reported period) enhances cash flow stability, but its small market cap ($141.7 million) limits economies of scale compared to larger peers. Unlike diversified REITs, SUNS’s niche focus reduces exposure to commercial or industrial real estate risks but increases dependency on regional housing policies and tenant demand. Its high beta signals sensitivity to macroeconomic shifts, a vulnerability shared by many small-cap REITs. While its dividend yield is competitive, larger competitors may offer better liquidity and diversified portfolios. Sunrise’s success hinges on executing accretive acquisitions while maintaining low leverage (debt-to-equity metrics are not provided, but $198.8 million debt vs. $184.6 million cash warrants scrutiny).

Major Competitors

• Mustang Apartment REIT (MUST): Mustang Apartment REIT focuses on high-growth urban rental markets in Canada, offering scalability that SUNS lacks. Its larger portfolio provides diversification, but higher leverage ratios could pose risks during downturns. Unlike SUNS, Mustang actively invests in property upgrades, potentially yielding higher rents but also increasing capex demands.
• Killam Apartment REIT (KMP.UN): Killam is a dominant player in Canadian residential REITs with a diversified portfolio across provinces. Its scale ($2B+ market cap) grants superior access to capital and lower borrowing costs, but its growth trajectory is slower than SUNS’s. Killam’s mature assets generate stable cash flows, contrasting with SUNS’s smaller, potentially higher-growth niche.
• Canadian Apartment Properties REIT (CAR.UN): CAPREIT is Canada’s largest residential REIT, with international holdings and a robust balance sheet. Its size and institutional-grade assets make it a lower-risk alternative to SUNS, though its dividend yield is less attractive. CAPREIT’s economies of scale in property management far exceed SUNS’s capabilities.