PETALING JAYA: Just two weeks ago, a research house said the worst is over for the real estate investment trust (REIT) sector.
But with things shifting daily with the Covid-19 pandemic and the announcement of the second movement control order (MCO) and the Emergency, views are changing again.
Maybank IB Research said it expected further downside risks to the sector, especially for mall and hotel owners.
“Based on our sensitivity analysis on REITs with retail assets, we estimate that one month of rental income loss would lower financial year 2021 (FY21) distribution per unit (DPU) by 2%-19%, ’’ it said.
REIT is a type of instrument that invests in real estate. It offers dividend yields and reports said one of the factors to look out for before investing in a REIT is increasing DPU. This is the money that investors receive from investing in REITs.
Maybank IB has retained its “neutral’’ call on the sector. Its top pick is Axis REIT for which it has a “buy’’ call with a target price of RM2.25.
It believes that retail assets are highly susceptible to the tightening of pandemic-related regulations, and remain as a dominant asset class within the REIT portfolio.
“All in all, we anticipate that key earnings drag for the REITs due to the MCO are rental rebate/support, lower turnover rent and lower occupancy, ’’ it said.
Maybank IB is keeping its earnings estimates, assumptions and dividend discount model target price intact at this juncture, pending further updates on the MCO and from the respective REITs.
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