The decorations at Sunway Pyramid is gets a colourful twist inspired by the beauty of stained glass.
PETALING JAYA: Real estate investment trusts (REITs) are set to perform well this year, offering strong distribution yields of between 5% and 9.1% amid market volatility driven by ongoing trade tensions that increased investor caution.
The projections are based on REITs under CIMB Research’s coverage.
As of April 2, Malaysian REITs had outperformed the FBM KLCI on a year-to-date basis, registering a 1.8% drop year-on-year (y-o-y), compared with the FBM KLCI’s y-o-y decline of 7%.
This translates to an outperformance of 5.3% relative to the broader market.
The research house expects sector earnings for the first quarter of this year to grow at 11% quarter-on-quarter.
This will be supported by new asset contributions, the reopening of refurbished areas and festive spending.
The research house remains “neutral” on the sector with Axis-REIT and Sunway-REIT as its top picks, offering between 14% and 18% upside to its target prices and supportive distribution yields of 5.5% to 6%.
It has “buy” calls on both Axis-REIT and Sunway-REIT with target prices of RM2.13 and RM2.11 a share, respectively.
The research house said Axis-REIT is relatively insulated from a potential electricity tariff hike owing to its high proportion (75%) of net lease agreements.
The sector is not affected by the government’s 2% tax on dividend income exceeding RM100,000 for individual shareholders, as it follows the unit trust structure.
The key risks for the sector include higher service taxes on tenants, rising interest rates, and lower building occupancy rates.
REITs under its coverage completed asset acquisitions last year worth RM1.2bil, an eight-year high, driven by portfolio expansions by Axis-REIT (RM794.6mil) and Sunway-REIT (RM373.0mil).
Sunway-REIT and IGB-REIT undertook asset-enhancement initiatives, including refurbishing anchor-tenant spaces, enabling them to reduce anchor tenants’ floor space and increase rental rates by up to three times per square foot for selected spaces.
The efforts are expected to boost the earnings base for REITs this year as the full-year impact kicks in.
Although global headwinds and subsidy rationalisation in the second half of this year may dampen consumer sentiment, the impact could be cushioned by the government’s efforts to promote tourism.
This is supported by an RM550mil allocation this year ahead of Visit Malaysia Year 2026.
