KUALA LUMPUR (Dec 24): AmInvestment Bank Bhd said today it has upgraded the Malaysia real estate investment trust (REIT) sector to "overweight" from "neutral" as the research firm believes the worst is over for the industry, which has contended with the impact of Covid-19-driven restricted movement policies.

In a note today, AmInvestment analysts wrote that for the next 12 to 18 months, REITs will be broadly on their recovery path as consumer spending and footfall recover.

"While we are aware that any further outbreaks of Covid-19 might still cause bumps to the recovery, earnings visibility has been improving following the encouraging development of vaccines with vaccinations already beginning in some countries.

"We believe the REITs under our coverage will stage a firm recovery post-pandemic, especially once international travel is allowed. This is mainly due to their strong market position and brand name, as well as the strategic location in the heart of the city, which give them the advantage of being the 'chosen malls' over the neighbourhood malls,” AmInvestment said.

REITs under AmInvestment’s coverage comprise IGB REIT, Sunway REIT, Pavilion REIT and YTL Hospitality REIT, according to AmInvestment’s note.

"Among the four REITs under our coverage, we anticipate that IGB REIT (fair value (FV): RM2.09) and Sunway REIT (FV: RM1.94) are primed to lead the recovery, underpinned by [their] resilient local footfall (supported by the well-connected adjacent community, i.e. residences, offices, universities) and good customer profile (i.e. mass affluent, which are more likely to spend during an economic recovery).

"While we believe Pavilion REIT (FV: RM1.84) and YTL Hospitality REIT (FV: RM1.26) will face more challenges in [their] recovery due to the greater reliance on tourist traffic, we remain positive on their long-term outlook as we believe the rebound in footfall will be strong once the travel ban is lifted," AmInvestment said.

Among the REITs listed on Bursa Malaysia today, IGB REIT’s unit price fell two sen or 1.14% to RM1.73 at 11:41am while Sunway REIT added one sen or 0.66% at 11:42am to RM1.52.

At RM1.73, IGB REIT has a market capitalisation of about RM6.16 billion while Sunway REIT’s unit price at RM1.52 values the property trust at some RM5.2 billion.

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