SECURITIES Commission Malaysia’s (SC) announcement of a temporary increase in gearing limit for Malaysian Real Estate Investment Trusts (M-REITs) has been labelled a timely relief measure for the industry by AmInvestment Bank.
SC announced that M-REITs would be able to increase its gearing from 50% to 60% with immediate effect until Dec 31, 2022, in a response to the impact of Covid-19.
The move would provide M-REITs with better cash flow flexibility and allow M-REIT managers to manage their debt and capital structures more efficiently, said AmInvestment.
“Based on the latest financial results, REITs under our coverage – YTL REIT and Pavilion REIT – have gearing of 40% and 30% respectively; meanwhile KIP REIT’s gearing stands at 34%,” the bank added.
AmInvestment is maintaining its buy recommendation on YTL REIT (relative value – RM1.26) and Pavilion REIT (fair value – RM1.91). – Aug 13, 2020
