Downgrading to Neutral. Whilst remaining positive over the long-term prospects of M-REITs, we downgrade the sector to Neutral as share prices approach our targets. The sector now trades at 6.8% average gross yield (5% for retail M-REITs), just 10bps below 2012 S-EIT's 6.9% (before 10% withholding tax for foreign institutional investors). The next re-rating catalyst is likely to be the REIT-ing of KLCCP, which may set a new benchmark in cap rates (capital valuation).

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Source: Maybank Research - 13 July 2012