PETALING JAYA: The resilient momentum of Malaysian real estate investment trusts (MREITs) is expected to persist, although some overhang remains, warranting a cautiously positive outlook.
Affin Hwang Investment Bank said the key focus areas include cost savings from a stable interest rate environment, volatility in global fuel prices and its impact on utility costs under the automatic fuel adjustment (AFA) framework, tourism uplift from Visit Malaysia 2026, the full-year impact of sales and service tax on leasing demand, uncertainty surrounding the expiry of the withholding tax concession, and strategic moderation in corporate exercises.
“Year-to-date, the KL REIT Index outperformed the FBM KLCI by 3%, supported by the strong share price performance of heavyweight MREITs such as KLCCSS, IGB-REIT and Sunway-REIT, as investors priced in firmer year-end distributions following a resilient 2025.
“This was underpinned by sizeable acquisition/refurbishment exercises and improved net property income contribution from core assets,” the research house said in a report yesterday.
Affin Hwang Investment Bank said with geopolitical risks escalating following the recent US-Israel strikes on Iran and subsequent retaliations, market volatility is likely to remain elevated.
The research house noted in such an environment, risk-off sentiment could drive stronger demand for defensive, income-generating asset classes.
“We expect MREITs to deliver an average 2026 distribution yield of 5.8%, with a defensive earnings profile backed by stable income streams and limited exposure to global uncertainties given their predominantly domestic-centric portfolios,” it said.
The research house said the MREIT sector delivered a solid 2025 distribution per unit or DPU growth of 11.6% year-on-year.
Moreover, the research house said year-to-date, MREITs under its coverage that met or exceeded estimates recorded share price gains of 2% to 7%, reflecting improved earnings visibility.
The research house added that relative to one-year fixed deposit rates, the current yield spread of 388 basis points (bps) remains comparatively favourable, as it stands above the five-year average spread of 383 bps.
Affin Hwang Investment Bank maintained an “overweight” call on the MREIT sector with “buy” calls on five names. Its preferred picks in order of preference are Axis-REIT, Pavilion-REIT, IGB-REIT, AME-REIT and KIP-REIT.
