The Malaysian REIT sector demonstrates resilience and growth potential, supported by a positive performance across various REITs. According to MIDF Amanah Investment Bank (MIDF) in their report today (July 17, Wednesday), the sector has seen an encouraging earnings recovery, particularly in retail and hotel segments, driven by higher tourist arrivals and economic reopening.
MIDF maintains a POSITIVE outlook on the REIT sector, citing stable earnings expectations and optimistic prospects. Sunway REIT and Pavilion REIT are highlighted as top picks with BUY ratings and revised target prices.
Notabaly, several REITs have recorded significant share price increases year-to-date, including YTL Hospitality REIT (+21.6%), Capitaland Malaysia Trust (+21.1%), Pavilion REIT (+20.7%), and IGB REIT (+15.8%). These gains reflect robust earnings recovery and investor confidence amidst sector-wide improvements.
Occupancy rates in shopping complexes have rebounded, reaching 77.6% in 1QCY24, driven by increased shopper footfall and tenant sales. However, office occupancy rates remain subdued at 72%, reflecting ongoing challenges in the office segment due to surplus office space and evolving work environments.
The sector is set for further expansion, with upcoming REIT listings anticipated from property companies seeking to unlock asset values. This initiative is expected to enhance market vibrancy and provide additional investment opportunities in Malaysia's REIT sector.
Sunway REIT anticipates normalised earnings from FY25 onwards following strategic reconfigurations at Sunway Pyramid, while Pavilion REIT has reported strong growth in First Quarter Fiscal Year of 2024 (1QFY24) (+18.7% year-on-year) driven by Pavilion Bukit Jalil and positive rental reversions at Pavilion KL Mall.
The earnings outlook for 2QCY24 remains positive, with retail-focused REITs poised to benefit from sustained high shopper footfall and favourable rental trends. Axis REIT also maintains a stable earnings trajectory, supported by robust demand for industrial spaces.