Reit sector set for strong second half
KUALA LUMPUR: Malaysia's real estate investment trust (Reit) sector is set for a resilient second half of 2025 (2H25), driven by asset recycling, enhancement works and a recovery in hospitality.
Maybank Investment Bank Bhd (Maybank IB) said key catalysts include Sunway Reit's RM613 million divestment of a tertiary property and Axis Reit's RM24 million sale of The Annex — a warehouse with office space.
It also pointed to Pavilion Reit's RM480 million hospitality acquisition and Axis Reit's purchase of six new properties.
The firm said asset enhancement by Sunway Reit and IGB Reit will support income growth, while KLCCP and Sunway Reit are expected to benefit from a post-Ramadan boost in hospitality.
"We also see strategic catalysts among them Reits, including CapitaLand Malaysia Trust (CLMT)'s industrial diversification into logistics to make up 7.9 per cent of assets under management by financial year 2026 (FY26) and Sentral Reit's ongoing pivot away from pureplay office exposure.
"Al-Salam is progressing on its "DISRUPT27" repositioning strategy, with asset recycling and Komtar JBCC's on-going reconfiguration expected to support medium-term yield and valuation recovery.
"Pavilion Reit and CLMT's planned placements and new assets also offer medium-term upside to earnings and distribution per unit growth," the firm said.
With Bank Negara Malaysia expected to consider an Overnight Policy Rate (OPR) cut in 2H25, Maybank IB said the trusts with higher floating-rate debt, currently around 47 per cent of sector average, stand to benefit from reduced financing costs.
The firm said this supports valuation upside and lowers financing costs for growth-oriented Reits.
"Nonetheless, most Reits continue to guide for stable dividends, and with gearing levels largely within comfortable thresholds. There remains room for selective growth via yield-accretive acquisitions," it added.
Maybank IB said the Reits' management maintained a cautiously optimistic outlook, flagging several macro uncertainties.
These include potential implementation of an 8.0 per cent service tax on rental, which would add costs for tenants while limiting Reits' ability to raise rents, as well as potential increase to electricity tariffs and broader economic uncertainties, such as fuel subsidies and tariff wars.
The firm maintained its "positive" stance on the the sector, underpinned by resilient fundamentals, attractive yields and visible catalysts for income growth in 2H25.
It noted that as the Reits appear to head towards further asset diversification, quality of assets in its portfolio would be crucial.
Sunway Reit remains Maybank IB's top pick with a target price of RM2.13. Other "Buy" calls include Pavilion Reit and Axis Reit, with target prices of RM1.83 and RM2.01, respectively, backed by income resilience and asset defensiveness
High-yield plays include YTL Hospitality Reit at RM1.18, Sentral Reit at 88 sen and Capitaland Malaysia Trust at 76 sen.
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