KUALA LUMPUR (Jan 15): Maybank Investment Bank has forecast the earning growth of Malaysia real estate investment trusts (REITs) to remain decent at 9.1% in 2024, compared with an estimated 6.9% in 2023, on the back of sustained occupancy, rental rates and new asset injection.

It also expects Bank Negara Malaysia to keep the overnight policy rate (OPR) at 3% throughout 2024, providing respite to higher financing costs witnessed in 2023.

In a note on Monday, Maybank IB retained its neutral call for the REIT sector in 2024 with an average net distribution per unit (DPU) yield of 6.4% across the sector.

“YTLREIT is our top buy (target price [TP]: RM1.08), due to its strong dividend yield of 8.1% and improving performance from its Australian hotels. Rental income from its Malaysia and Japan hotel portfolios should remain resilient due to their long-term master lease arrangements,” it said.

The research house has also maintained its “buy” rating for Pavilion REIT (TP: RM1.41), Sentral REIT (TP: 96 sen) and Axis REIT (TP: RM2.16).

“We expect PREIT to benefit from the improved performance of Pavilion KL and the full-year contribution from Pavilion Bukit Jalil. Meanwhile, Sentral’s earnings growth will be supported by a higher occupancy rate for its office assets and new contributions from Menara CelcomDigi. We continue to like [Axis REIT] due to its high exposure to the industrial segment and active search for new assets to grow its portfolio,” it stated.

Furthermore, Maybank IB expects the 10-year Malaysian government securities (MGS) yield to lower to 3.50% by the first half of 2024, translating into an estimated net yield spread of 192 basis points.

“With global monetary policy tightening at its tail-end, interest should return to high-yielding stocks in 2024. Malaysia’s REITs currently offer an estimated average 2024 net yield of 6.4%, primarily led by YTLREIT (8.1%) and Sentral (7.9%). Meanwhile, the sector’s trailing net yield spread against the 10-year MGS yield is at 227bps, above its 10-year mean of 121bps,” it added.

On Monday, the unit price of YTLREIT rose 1.79% or two sen to an all-time-high of RM1.14, valuing the group at RM1.94 billion.

Pavilion REIT remained unchanged at RM1.25, valuing it at RM4.57 billion. Sentral REIT also saw its unit price remain unchanged at RM0.79, valuing it at RM944 million.

Meanwhile, Axis REIT dropped 1.12% or two sen to RM1.76, giving the group a market capitalisation of RM3.08 billion.