Top Story : Property – Expect imminent re-rating on Malaysian REITs Overweight
Sector Note
♦ We like M-REITs due to their natural defensive qualities and solid property market fundamentals. Thesemake them excellent asset class in the current volatile market environment. On top of that, M-REITs is currently trading at attractive FY10 spread 10-year MGS, 10-year Cagamas bond and even its regional peer, S-REITs.
♦ The emergence of a new sector leader i.e. Suncity REIT in the M–REITS arena will help to inject excitement and interest into the sector. The REIT is expected to have an asset size of more than RM3.0bn. Given its size, it is expected to be the bellwether for the M–REITs industry and help to inject interest and excitement.
♦ We expect REIT players to renew their focus on portfolio expansion and growth in distributable income. Further acquisitions are likely in the coming year. We advocate that investors with lower risk appetite and longer-term investment horizon should position themselves in the M-REITs given their high yield and defensive nature. In addition, as the industry grows, liquidity will improve and we expect a sustainable narrowing of yield gap with S-REITs. Our current top pick for the sector is Axis REIT.
RHB Equity 360° Property, Genting Singapore, Magna Prima; Technical: Proton, Affin) - 08/03/2010
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