Reit sector set for strong second half
KUALA LUMPUR: Malaysia's real estate investment trust (Reit) sector is set for a resilient second half of 2025 (2H25), driven by asset recycling, enhancement works and a recovery in hospitality.
Maybank Investment Bank Bhd (Maybank IB) said key catalysts include Sunway Reit's RM613 million divestment of a tertiary property and Axis Reit's RM24 million sale of The Annex — a warehouse with office space.
It also pointed to Pavilion Reit's RM480 million hospitality acquisition and Axis Reit's purchase of six new properties.
The firm said asset enhancement by Sunway Reit and IGB Reit will support income growth, while KLCCP and Sunway Reit are expected to benefit from a post-Ramadan boost in hospitality.
"We also see strategic catalysts among them Reits, including CapitaLand Malaysia Trust (CLMT)'s industrial diversification into logistics to make up 7.9 per cent of assets under management by financial year 2026 (FY26) and Sentral Reit's ongoing pivot away from pureplay office exposure.
"Al-Salam is progressing on its "DISRUPT27" repositioning strategy, with asset recycling and Komtar JBCC's on-going reconfiguration expected to support medium-term yield and valuation recovery.
"Pavilion Reit and CLMT's planned placements and new assets also offer medium-term upside to earnings and distribution per unit growth," the firm said.
With Bank Negara Malaysia expected to consider an Overnight Policy Rate (OPR) cut in 2H25, Maybank IB said the trusts with higher floating-rate debt, currently around 47 per cent of sector average, stand to benefit from reduced financing costs.
The firm said this supports valuation upside and lowers financing costs for growth-oriented Reits.
"Nonetheless, most Reits continue to guide for stable dividends, and with gearing levels largely within comfortable thresholds. There remains room for selective growth via yield-accretive acquisitions," it added.
Maybank IB said the Reits' management maintained a cautiously optimistic outlook, flagging several macro uncertainties.
These include potential implementation of an 8.0 per cent service tax on rental, which would add costs for tenants while limiting Reits' ability to raise rents, as well as potential increase to electricity tariffs and broader economic uncertainties, such as fuel subsidies and tariff wars.
The firm maintained its "positive" stance on the the sector, underpinned by resilient fundamentals, attractive yields and visible catalysts for income growth in 2H25.
It noted that as the Reits appear to head towards further asset diversification, quality of assets in its portfolio would be crucial.
Sunway Reit remains Maybank IB's top pick with a target price of RM2.13. Other "Buy" calls include Pavilion Reit and Axis Reit, with target prices of RM1.83 and RM2.01, respectively, backed by income resilience and asset defensiveness
High-yield plays include YTL Hospitality Reit at RM1.18, Sentral Reit at 88 sen and Capitaland Malaysia Trust at 76 sen.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Malaysian Reserve
an hour ago
- Malaysian Reserve
In search of opportunities amid Mideast, tariff uncertainties
From a macro perspective, Maybank IB expects attention in 2H25 to be focused on cross currents of external headwinds amid domestic tailwinds THE second half of 2025 (2H25) might be more tumultuous, if not even more fluid compared to the 1H. 'Recent Middle Eastern conflicts coupled with ongoing tariff negotiations and supply chain disruption, plus domestic policy changes are expected to shift sands in 2H25,' according to Maybank Investment Bank Bhd (Maybank IB) in a strategy report. It has kept its year-end FTSE Bursa Malaysia's Kuala Lumpur Composite Index (FBM KLCI) target at 1,660 points, which is 14.4 times 2026E price earnings ratio, which is its base case and assumes further de-escalation in trade tensions and favourable tariff negotiations. In the report dated June 22 entitled: 'Shifting sands: Malaysia 2H25 Outlook & Lookouts', Maybank IB has added SD Guthrie Bhd and Westports Holdings Bhd as its tactical picks, and reaffirmed YTL Power International Bhd and Gamuda Bhd as its data centre conviction thematic plays. It has also further added Sunway Construction Group Bhd and MN Holdings Bhd as activities pick up. Its top picks were Public Bank Bhd, AMMB Holdings Bhd, Tenaga Nasional Bhd (TNB), YTL Power, Gamuda, KPJ Healthcare Bhd, Farm Fresh Bhd, Solarvest Holdings Bhd and Pavilion Real Estate Invest- ment Trust (REIT). In the technology space, the report noted that its selective picks remained Frontken Corp Bhd, ITMax System Bhd and Aurelius Technologies Bhd. From a macro perspective, Maybank IB said it expected attention in 2H25 to be focused on cross currents of external headwinds amid domestic tailwinds, which when combined, should still offer upside to the equities market albeit more selective. 'Our five themes are intact and remain well in progress. We reiterate our 'Neutral' stance on the banks, leveraging on the softer 2H25 macro outlook, but stress that there could be upside to our forecasts should banks decide to use management overlays to buffer credit costs — Public Bank and AMMB Holdings, our bank picks, are well positioned for this. 'Elsewhere, we remain positive on domestic-centric consumer plays as we expect domestic policy tailwinds to keep the Malaysian economy on a growth path,' it said. Besides the consumer sector, the report said Maybank IB remained 'Positive' on healthcare, REITs and renewable energy (RE). For 2H25, it has raised its conviction for the construction sector amid build-up in activities within the data centre space. Besides REITs, other defensive picks such as Telekom Malaysia Bhd (TM) and TIME dotCom Bhd are among telcos that fit the theme. Given current circumstances with heightened external uncertainties, it said it had flagged additional three sector thematics to explore for the rest of the year — plantations, utilities/RE and ports. Mideast Conflict The Middle Eastern conflict has triggered oil prices surge and indirectly crude palm oil (CPO) price bounce, though this could be temporary. While its expected CPO prices to end the year at RM4,000 per tonne, only a sustained level above RM4,500 per tonne could be a surprise for planters on the upside. Regardless, it said SD Guthrie would be the best proxy for the planters. Separately, as the National Energy Transition Roadmap (NETR) continues to track well, it said awards for RE, battery energy storage systems (BESS) and carbon capture, utilisation and storage (CCUS) abound. Apart from TNB, it noted that MN Holdings was well-positioned to benefit from BESS contracts. Lastly, it noted that as ports face congestions amid tariff and Middle Eastern concerns, it expected to see storage rates surge. Coupled with higher tariff rates with effect from July 1, Westports stands out as a beneficiary. 'We believe there should be a resolution to tariff issues though with a timing risk. As we write, the Malaysian government is still in negotiation with the US on reciprocal tariffs (link). 'A further risk that could arise from here is the extended Middle Eastern tensions. Softer 2H25 macro and any market weakness would offer investors an opportunity to accumulate stocks, especially the banks, which we believe stand out as long-term winners,' it said. Separately, it noted that the tech sector remained at crossroads, hence it selectively liked Farm Fresh and Greatech Technology Bhd in the semicon space and Aurelius Technologies among electronics manufacturing services (EMS) plays. Fiscal Reforms The 92-page report also discussed the fiscal focus in 2H25. Here, it pointed out that the focus was on the rollout of fiscal reforms and tax measures outlined in Budget 2025, namely RON95 petrol subsidy rationalisation, Sales and Services Tax (SST), e-invoice and stamp duty. 'The overhang in the implementation of the targeted RON95 petrol subsidy rationalisation remains,' it said. It noted that it appeared that the official statements on the execution timing, responsibility and scope have changed from mid-year to 2H25. Another change was from the exclusion of the top-15% (T15) income group to exclusion of the top-5% (T5) income group in terms of RON95 fuel subsidy eligibility — while maintaining the exclusion of foreigners. 'However, it is also worth noting that the government is incurring savings in fuel subsidies thanks to the drop in crude oil prices as well as firmer ringgit versus the US dollar,' it said. It noted that the Budget 2025 allocation for fuel subsidies was based on the average (Brent) crude oil price assumption of US$75 (RM319.50)-RM80 per barrel versus US$72 per barrel year-to-date (YTD). 'We currently expect crude oil price to average US$67 per barrel this year, although the outbreak of Israel-Iran conflict poses upside risk to this outlook,' it said. — TMR This article first appeared in The Malaysian Reserve weekly print edition
![[UPDATED] Govt open to fact-based SST criticism, says Anwar](/_next/image?url=https%3A%2F%2Fassets.nst.com.my%2Fimages%2Farticles%2Fsefe_1751247172.jpg&w=3840&q=100)
![[UPDATED] Govt open to fact-based SST criticism, says Anwar](/_next/image?url=https%3A%2F%2Fassets.nst.com.my%2Fassets%2FNST-Logo%402x.png%3Fid%3Db37a17055cb1ffea01f5&w=48&q=75){kind=small}
New Straits Times
an hour ago
- New Straits Times
[UPDATED] Govt open to fact-based SST criticism, says Anwar
PUTRAJAYA: The government is open to criticisms over the expansion of the Sales and Service Tax (SST), but such views must be based on facts, said Prime Minister Datuk Seri Anwar Ibrahim. Speaking at the Prime Minister's Department monthly assembly today, Anwar said the Cabinet's decision to expand the SST was made carefully to ensure it does not burden the majority of the people. He also said student groups had claimed that electricity tariffs had increased under the expansion of the tax structure, but reiterated that tariff adjustments only affect the top 10 to 15 per cent of users. "I do not quite understand. Is it true that students are affected? If universities are imposing electricity charges on students, and if that is accurate, then we must look into it. "But from what I understand, public universities are exempted. "Issues like this are sometimes widely circulated, and freedom has turned into a space for slander and insults. "That is why I encourage everyone, especially our younger generation, to share accurate facts. I have no issue with people criticising or voicing concerns," he said. Present were both Deputy Prime Ministers, Datuk Seri Dr Ahmad Zahid Hamidi and Datuk Seri Fadillah Yusof, as well as Chief Secretary to the Government Tan Sri Shamsul Azri Abu Bakar. The revised SST rates outlined under the 2025 Budget would come into effect on July 1. The Finance Ministry said the measure aims to strengthen the country's fiscal position by increasing revenue and broadening the tax base. Under the revised structure, selected non-essential and luxury goods will be taxed at rates between 5 and 10 per cent. While staple items such as sardines, tuna and mackerel (kembung) remain exempt from the SST, premium imported seafood like salmon, cod and king crab will incur a 5 per cent tax. Meanwhile, local fruits are exempt from the sales tax, with only imported fruits incurring the 5 per cent rate. Commenting further, Anwar, who is Finance Minister, said imposing SST on certain imported fruits was part of a targeted effort to promote local produce. "When we introduced it on imported fruits, it was because we believed that it was time. We have fertile land, where anything can be grown, even in our own backyard. "So we started with a cautious approach, introducing a small tariff or tax on imported fruits. Zahid and other colleagues mentioned that apples, oranges, and dates should be excluded. "So I said, let's check with the ministry and even though it is rare for the ministry to revise a decision shortly after it is made, we can do that. "For instance, with dates, we can adjust it ahead of next year's Ramadan, but to say that this (expansion of SST) is burdening the people, we must examine that carefully."
New Straits Times
5 hours ago
- New Straits Times
SST revision welcomed, but broader relief needed for MSMEs
KUALA LUMPUR: The government's move to raise the sales and service tax (SST) registration threshold to RM1 million is seen as a positive step that offers some breathing space for micro, small and medium enterprises (MSMEs), although wider structural challenges remain. Small Medium Enterprise (SME) Association of Malaysia president Chin Chee Seong said the higher threshold will ease some cost pressures for small landlords and tenants, providing modest relief for smaller businesses working hard to stay afloat in a tough economic climate. However, he noted that many MSMEs, especially those renting from large commercial property owners, will still have to bear the eight per cent service tax, meaning the tax burden will continue to weigh on businesses already struggling with tight margins, rising costs and subdued consumer spending. "As such, the tax burden continues to cascade onto small businesses, many of which are already grappling with razor-thin margins, inflationary pressures, and weak consumer demand," he told Business Times. Chin pointed out that the higher threshold is unlikely to have a significant impact on government revenue, as it mainly exempts a small group of smaller service providers. He cautioned, however, that the larger economic impact of not easing the SST burden for MSMEs could include business closures, job losses and higher prices for consumers, outcomes that could ultimately cost more than the short-term tax revenue gained. He added that the government must prioritise long-term economic resilience over marginal revenue expansion, particularly when over 60 per cent of Malaysia's gross domestic product (GDP) is driven by domestic consumption and SME activity. On the exemption of imported fruits such as mandarin oranges and dates from the sales tax, Chin described it as a thoughtful gesture that will help keep prices stable during key festive periods like Chinese New Year and Ramadan, benefiting many low- and middle-income households. He noted that this can help keep prices stable during festive seasons and provide small relief for low-income and middle-income households. However, Chin said the impact on overall inflation will be very small, as these fruits make up only a small part of what people usually spend on. "Without addressing bigger cost issues like the eight per cent SST on commercial rentals, high logistics costs, and rising prices of goods. "This exemption won't make a big difference in controlling inflation. In short, while this is a welcome and symbolic gesture, it should be part of a broader and more effective plan to control rising costs and support consumer spending," he said. Overall, Chin said the government's decision to revise the SST, particularly by exempting beauty services and raising the registration threshold, shows it is responding to public concerns and industry feedback, which is a positive step. He added that it reflects a move towards more targeted and thoughtful tax policies, instead of applying the same rules to everyone. However, Chin said these decisions also highlight a reactive approach made after pushback, rather than based on proper economic analysis or early consultation. He added that making tax changes in bits and pieces can cause confusion, create loopholes, and make the system harder to manage. "To build trust and ensure fairness, the government should develop a clearer, long-term tax strategy based on actual business data and input from all affected sectors. "A more structured system, perhaps reconsidering goods and services tax (GST) with input tax credits, may offer a fairer and more sustainable solution in the long run," he said. On June 27, the government announced a revision to the SST framework, following extensive feedback from the public and engagement with industry stakeholders on the proposed expansion. As part of the revised plan, imported mandarin oranges and dates will be exempted from the sales tax, while essential goods such as rice and local fish will remain tax-free. The service tax registration threshold has been raised to RM1 million for selected sectors, easing compliance for small businesses. The government has also scrapped the proposed service tax on beauty and personal grooming services such as manicures, pedicures, facials, barber services, and hairdressing.
