• Securities Commission (SC) has announced that it will temporarily increase the gearing limit for Malaysian REITs (M-REITs) from 50% to 60%, with immediate effective, until 31 December 2022.

• As the financial system adjusts to the impact of Covif-19, SC said it would continue to monitor the evolving situation in global and domestic markets.

• We believe the temporary increase in gearing limit will provide M-REITs better cash flow flexibility and will allow M-REIT managers to manage their debt and capital structures more efficiently, in light of the challenging operating environment during the Covid-19 pandemic.

• Based on the latest financial results, REITs under our coverage namely YTL REIT and Pavilion REIT have gearing of 40% and 30% respectively meanwhile KIP REIT’s gearing stands at 34%.

• We maintain our BUY recommendation on YTL REIT (RV- RM1.26) and Pavilion REIT (FV – RM1.91).

Source: AmInvest Research - 13 Aug 2020