KUALA LUMPUR (Jan 13): Al-Salam Real Estate Investment Trust (KL:ALSREIT) will see “significant” rental growth from this year onwards thanks to higher occupancy at its most valuable property, BIMB Securities said.

Komtar JBCC in Johor Bahru — which makes up about one-third of Al-Salam’s total property value — will see its occupancy rise to 80% by the end of this year from 69% currently, the research house said in initiating coverage on the REIT at ‘buy’ with a target price of 46 sen.

“We anticipate consistent yield improvement moving forward, supported by rising rental rates,” BIMB Securities said. “We believe the REIT is poised for further re-rating, driven by the recovery in rental rates from its diversified asset base, particularly in Johor Bahru.”

The REIT manages a diverse 54 properties worth RM1.24 billion, spanning retail, office, restaurants, and industrial sectors.

Al-Salam’s units on Bursa Malaysia fell more than 20% last year amid a decline in net profit even as net property income edged higher. Higher Islamic financing costs and other trust expenses weighed on net income. The stock is up less than 3% in the first two weeks of 2025.

Maybank Investment Bank is the only other research house covering Al-Salam. It last downgraded the trust to ‘sell’ in November 2024 following weaker-than-expected quarterly results.

BIMB Securities expects revenue will recover to pre-pandemic level in 2026. Further, the average rental rate at Komtar JBCC could double once the Johor Bahru-Singapore Rapid Transit System starts operations, the research house highlighted.

The property would be connected via a pedestrian bridge to the Bukit Chagar Station, potentially doubling the mall’s footfall to about 1.7 million in 2027. BIMB Securities expects revenue will recover to pre-pandemic level in 2026. Further, the average rental rate at Komtar JBCC could double once the Johor Bahru-Singapore Rapid Transit System starts operations, the research house said, citing Al-Salam’s estimates.

“This anticipated surge in foot traffic is expected to significantly bolster retail sales and reinforce Komtar JBCC’s role as a centrepiece of Johor Bahru’s retail and economic growth,” it added.

Overall, Al-Salam’s net profit will likely remain steady at RM10.5 million for 2024 and 2025, according to BIMB Securities estimates.