KUCHING: Hektar Real Estate Investment Trust (Hektar REIT) is expected to continue facing a challenging operating environment due to prolonged weak domestic customer sentiment and intensified competition in it’s largest malls, Subang Parade and Mahkota Parade.

Both Subang Parade and Mahkota Parade have recorded negative rental reversion rates of minus 5.8 per cent and minus 16.4 per cent respectively.

RHB Research Institute Sdn Bhd (RHB Research) believes that these reversion rates were due to Hektar RIET’s management sacrificing rental rate growth for sustained occupancy rates.

Despite this, there have been records of positive rental reversions in Hektar REIT’s Kedah assets.

These Kedah assets are Hektar REIT’s malls in smaller towns such as Central Square in Sungai Petani and Landmark Central in Kulim.

RHB Research believes that there will be likely to sustain healthy growth and provide support towards its malls in bigger cities.

RHB Research made no changes to their forecasts of financial year 2016 (FY16) and FY17 with a decision to maintain their neutral call towards Hektar RIET with a higher target price of RM1.57 due to a lower risk-free-rate assumption.