AMINVESTMENT Bank Research has maintained its neutral view on the property and real estate investment trust (REIT) sectors as it does not anticipate earnings surprises in the short to medium term.
It expected the movement control order (MCO) put in place from March 18 to 31 to trigger a short-term negative impact on local property sales and retail REITs.
“Our top picks for the sector are Sunway Bhd with fair value (FV) of RM2.07 given its diversified income base and IOI Properties Group Bhd (IOIPG) which is banking on its property development projects in China with FV of RM1.54.
“We also maintain our buy recommendation on Sunway REIT (SREIT) with FV RM1.88, YTL Hospitality REIT (YTL REIT) with FV of RM1.43, Mah Sing Group Bhd (FV 80 sen) and UEM Sunrise Bhd (FV 49 sen),” said the research house in a note on March 19.
“Most developers are planning to defer their new launches. At the same time, they are also assessing the economic situation before deciding whether to revise their sales targets.
“Nevertheless, we believe there will be some spillover effects on local property sales as a result of the negative impact on the local economy. Hence we are revising our earnings forecasts to reflect the impact,” it said.
AmInvestment believes there will be a negative impact on Pavilion REIT (PREIT) and also SREIT as most of its properties are made up of shopping complexes.
“We reckon the spillover effects on the local economy may drag the negative sentiment further. Therefore, we are revising our FY20 and FY21 earnings downwards by 15.8% and 15.5% respectively for PREIT and 13% and 13.4% respectively for SREIT.
“As for YTL REIT, the properties in Malaysia and Japan are under master leases, hence they shall remain stable. Nonetheless, we cut its FY20 and FY21 earnings by 12.6% and 10.9% respectively to reflect the lower earnings from its Australian properties due to Covid-19 and its effect on the global economy,” it said.
Overall, the research house expects the outlook for retail properties to remain stable in the longer term.
Shopping malls and hotels are poised to gain from the recent stimulus measures with a 15% discount in monthly electricity bills for six months from April until September 2020, while at the same time shopping malls are also encouraged to reduce rentals for their tenants and hotels to offer discounts to customers. — March 19, 2020
