KUALA LUMPUR, July 26 — The real estate investment trusts (REITs) is believed to be on a recovery path moving into the second half (2H) of 2021 as the economy reopens in stages, said AmInvestment Bank.
In a note on the REIT sector’s report, it said 2H 2021 would also see the recovery in retail sales, fuelled by pent-up consumer demand after the lockdowns, similar to what has happened in the past as consumers tend to revenge spend once movement restrictions are lifted.
“Based on the previous occasions when lockdowns were lifted, the malls under our coverage observed higher average sales per footfall.
“We believe earnings visibility and associated risks of REITs now are much better as compared to last year, thanks to the widening rollout of vaccines both locally and globally,” said the research firm.
Meanwhile, AmInvestment Bank said the current subdued performance in retail REIT’s share prices makes it a good opportunity for investors to invest in quality retail REITs assets, supported by better quality tenants.
It noted that those tenants are more likely to survive the economic downturn caused by the pandemic and thus support occupancy rates of the malls.
Beyond 2021, the research firm believes that the recovery in international tourist traffic would further boost retails REITs’ earnings prospects.
It also maintained its ‘overweight’ recommendation on the sector based on its estimates of REITs under its coverage, as the REITs are expected to provide distribution yields of over five per cent for financial year 2022 and beyond, compared to the current low-interest-rate environment.
“We like the sector as a recovery play as it is poised to benefit from the growth in Malaysia’s post-pandemic economy,” it said.
However, it noted that the sector may be downgraded to ‘neutral’ due to reasons such as slower-than-expected footfall recovery, massive decline in occupancy rate due to increased competition from the oversupply of retail spaces, or further deterioration of consumer spending or sentiments. — Bernama