MREIT Managers Turn Cautious On Earnings Outlook, Affin Hwang

Pavither April 16, 2020

Affin Hwang Investment Bank Bhd said managers of Malaysian Real Estate Investment Trust’s (MREIT) decision-making relevant to rebate schemes as well as the scope and scale of rental assistance is taking longer than expected, due to increased uncertainties over Covid-19, the domestic economy and the Movement Control Order (MCO).

This comes as managers are cautious on the 2020 rental outlook of shopping malls as well as the 2020 earnings outlook of REITs, on the back of the heightened uncertainties.

“To recap, we had incorporated an 8% year-on-year decline in the shopping malls’ 2020 base rent and assumed they will receive no turnover rentals for 2020,” said the research firm.

Affin Hwang projects that every 4% change in the base rent of shopping malls will affect the 2020E earnings of diversified MREITs by 1% to 4%, and by 6% to 8% for retail MREITs’ 2020E earnings, reported Bernama.

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Meanwhile, logistics, warehouse and office rentals are expected to soften by 2% to 7% year-on-year in 2020.

“The ensuing weak economic growth and difficult business environment should affect their 2020-22 rental growth,” explained Affin Hwang.

“For offices, an MREIT manager cautioned that these events may affect the upcoming rental reversions, as businesses are generally not doing well now and it may take a while before business activities recover to the pre-COVID-19 level,” it concluded.

 

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