Published: Monday September 24, 2012 MYT 8:50:00 AM
RHB Research: Focus on Malaysian REITS
KUALA LUMPUR: RHB Research Institute encourages investors to focus on Malaysian real estate investment trusts (REITs) with acquisition growth catalysts, which it has yet to factor into its forecasts and valuations.
"Among the MREITs under our coverage, we think Sunway REIT, CMMT, Axis REIT and Pavilion are more likely to embark on acquisition mode in this and next year," it said on Monday.
The research house, in its outlook report on MREITS, said although the REITs are likely to have limited room for yield compression, it believes the premium valuations will hold.
"The low interest rate and volatility in the local equity market led by uncertain global economic outlook as well as the election risk continue to favour dividend-paying stocks and the MREIT sector is one of them," it said.
RHB Research said potential surprises are likely to come from yield accretive acquisitions. Thus far, only Axis REIT, Starhill REIT, AmFirst REIT and Amanahraya REIT have announced their acquisitions this year.
On the other hand, the retail REIT players have yet to acquire any new properties. Given the current valuations and hence lower cost of capital as well as the low interest rate environment, the relatively higher physical asset yields suggest that assets can be acquired accretively.
"Admittedly, quality physical property asset values have also appreciated significantly, largely driven by liquidity. We believe sponsored MREITs with ready pipeline assets will be ahead of the acquisition game," said RHB Research.