KUALA LUMPUR (March 10): Maybank Investment Bank (Maybank IB) has maintained its “neutral” call on Malaysia’s real estate investment trusts (REITs) on the back of satisfactory fourth quarter (4Q) performance, with most financial results within expectations.

The investment bank said growth was sustained by prime malls and long-term office tenants, although there were pockets of weaknesses at some multi-tenanted offices and neighbourhood malls. 

"We remain neutral on the sector as we wait for more distribution per unit (DPU)-enhancing prospects,” it said in a research note today.

The investment bank said the two overnight policy rate (OPR) interest rate cuts of 25 basis points (bps) each in year-to-date 2020 by Bank Negara Malaysia (BNM) and the current OPR at 2.50% would be positive for the sector.

"We expect some finance cost savings on Malaysia’s REITs’ floating rate debt.

“Elsewhere, a lower interest rate environment would also encourage more asset acquisitions by Malaysia’s REITs, which are generally financed by debt,” it said.

Going forward, it said the sector is expected to grow by 6% year-on-year in 2020 premised on organic growth driven by higher rental income and stable occupancy.

“We continue to like prime malls and office and industrial properties with long-term tenants that contribute to rental-income resilience,” it said.

However, it said, a sizeable acquisition pipeline would remain dry while organic growth could be challenged by the adverse impact of the Covid-19 outbreak.

“Elsewhere, we expect a further OPR cut at the May 4-5 BNM's Monetary Policy Committee (MPC) meet,” it added.

Maybank Investment Bank has chosen YTL Hospitality REIT as its top pick counter of the sector and has put a “buy” recommendation on the counter.

Others counters with the investment bank’s “buy” recommendation are Sunway REIT (SunREIT) and MRCB-Quill REIT (MQREIT).