MIDF maintains earnings assumptions for REITs

  • Analyst Reports
  • Monday, 11 Mar 2019

KUALA LUMPUR: MIDF research has maintained most of its earnings assumptions for REITS under its coverage as their performance in 4Q2018 came mostly in line.

"On year-on-year basis, REITs under our coverage reported mixed earnings with 6 recorded higher and 2 registered lower CNIs compared to the previous corresponding cumulative period. Altogether, the results were within our expectations," it said.

HOwever, MIDF said the current yield spread of 1.5ppts is unexciting as it is lower than the three-year mean of 1.7ppts between MREITS and 10-year MGS yield. 

It added that REIT unit prices have strengthened since the start of the year, which narrows the upside potential in capital gains.

Moving forward, MIDF has increased the target prices for Axis REIT to RM1.62 from RM1.55 previously, Al-Aqar to RM1.49 from RM1.45, CMMT to RM1.08 from RM1.02, IGB REIT to RM1.77 from RM1.73 and Pavilion REIT to RM1.67 from RM1.60. 

"Our top pick for the sector is Sunway REIT (BUY; TP: RM1.93) due to the stable earnings supported by its crown jewel Sunway Pyramid. 

"Moreover, we believe its office segment may improve during the financial year. 

"We also have Buy call on AmanahRaya REIT (TP: RM0.91) for its diversified assets base with exposure to education property and attractive dividend yield of 6.9% and Al-‘Aqar (TP: RM1.45) for its unique position as a defensive healthcare REIT," it said.
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