The re-pricing of M-REITs could continue in the current volatile yield environment due to the weak MYR and further foreign selloff of domestic bonds. We may , however , see some room for re-rating the M-REITs once the MYR volatility and foreign fund outflows subside, probably in 2H15, supported by a low interest rate environment. Weak economic data in the Eurozone and Japan as well as China’s slowing economic growth suggest monetary easing will continue and interest rate hikes may be pushed back.
The REIT-ing of WCT’s retail assets worth MYR2b in asset value could create some excitement in 2H15.
The time is not ripe to be bold especially in 1H15 due to the high volatility in the MYR and bond yields. Historically, the yield spread between the 10-year MGS and M-REITs has been about 308 bps (2011-2014), but this has since narrowed to 241bps currently. The risk is that the spread could normalize as investors demand a higher risk premium over the MGS yield and this would imply a further downside of -7% to -12% in M-REITs’ unit prices. We had adjusted our TPs by -0.7% to +7.8% in our market strategy report on 18 Dec 2014 after reviewing our assumptions for: 1) the risk free rate which was raised to 4.2% from 4.0%, 2) betas which were revised to 0.5-0.9 (from 0.57-0.9) and 3) terminal cap rates. Maintain BUY on KLCCP and CMMT (TP: RM 1.59) but lower PavREIT (TP: RM 1.49) to HOLD due to share price out performance. We remain HOLDERs of AXRB (TP: RM 3.40), Quill Capita (TP: RM 1.15), IGBR (TP: RM 1.29) and SunREIT (TP: RM 1.36).
Source: Maybank Research - 12 Jan 2015
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AXREIT2024-08-27
AXREIT2024-08-27
CLMT2024-08-27
CLMT2024-08-27
KLCC2024-08-27
KLCC2024-08-27
PAVREIT2024-08-26
CLMT2024-08-26
CLMT2024-08-26
SUNREIT2024-08-23
AXREIT2024-08-23
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KLCC2024-08-23
KLCC2024-08-23
PAVREIT2024-08-23
PAVREIT2024-08-23
SENTRAL2024-08-22
CLMT2024-08-21
CLMT2024-08-21
KLCC2024-08-21
KLCC2024-08-20
CLMT2024-08-18
SUNREIT
regnig
1H15 good time to accumulate m-reits
2015-01-12 16:20