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It is the belief of the research team at Maybank Investment Bank Bhd (Maybank IB Research) that the growth of M-REIT in 2020 will mostly be organic.

As stated in a Maybank IB Research report, “We estimate M-REITs’ growths to be largely organic in 2020, via positive rental reversions and sustained occupancy rates while there are M-REITs that would record full-year rental income contributions from assets acquired in 2019.”

They further went on to add that, “The oversupply of retail and office space in the Klang Valley (where most of the M-REITs’ key assets are located in) would remain a major challenge. Meanwhile, we expect direct earnings lift to M-REITs to be minimal from easing of financing costs of variable rate debts. Our economist forecasts the overnight policy rate (OPR) will be cut by 25bps to 2.75% in 2020.”

Also stated in the report is the belief of Maybank IB Research that the acquisition pipeline will remain subdued in the year 2020, encompassing only smaller sized assets such as major deals. There is no expected developments until the following year in 2021.

They, however, plan to keep the YTL REIT as their top buy, due to the strong hotel assets of its parents which offer potential growth catalysts from their top 3 Australian hotel chains. The earnings from their Malaysian and Japanese assets are also resilient.

The report closed with the note, “Our 2020 forecasts have only imputed Axis REIT’s RM439 million worth of industrial property development/acquisitions. Beyond the near term, YTLREIT, SunREIT and Axis are our preferred picks for acquisition-play.”

(14 January 2020)