MREITs ripe for bottom fishing

KUALA LUMPUR: After recording share price losses of 6 to 29 per cent year to date, analysts reckon that the sell-downs for Malaysian real estate investment trusts (MREITs) are overdone and aer now ripe for bottom-fishing.

In a sector update, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) felt the recent share price losses of MREITs were unwarranted as recent fourth quarter of 2017 (4Q17) were within expectations with most stocks’ fundamentals being intact.

Under Kenanga Research’s coverage, all MREITs’ 4Q17 results were within expectations, save for IGBREIT which came in slightly above expectation due to an unexpected low borrowing cost.

“This was better than 3Q17 when all MREITs’ results came in within our expectations, and Pavilion REIT missed consensus estimates,” said the research arm.

In spite of that, the KLREIT Index was still down 12 per cent year to date (YTD) dragged by large cap MREITs, while the declines of smaller cap MREITs were not as severe, coming in between minus two to 16 per cent YTD.

“We reckon that MREITs under our coverage saw substantial declines this year on perceptions of a growing oversupply of office and retail spaces in the Klang Valley, and expectations of a negative impact from an overnight policy rate (OPR)hike,whichweviewasunsubstantiated,” reasoned the research arm.