KUALA LUMPUR: MIDF Amanah Investment Bank Bhd (MIDF Amanah) has maintained its positive outlook for Malaysia's real estate investment trusts (REIT), led by the retail and industrial sub-segments.

The investment bank said the retail industry is expected to return to organic growth of positive rental reversion as it recovers to pre-pandemic level.

Meanwhile, the industrial asset performance is expected to remain stable while rental rate is expected to grow due to healthy demand for industrial asset.

"We also see that hotel industry will continue to recover in the second half of 2024 (2H 2024) as tourist arrivals are expected to increase as Malaysia is offering visa-free entry to travellers from several countries which will boost the tourism industry," it said.

As such, MIDF Amanah has maintained its "Positive" stance on the sector, with Sunway REIT as the top pick (Buy; target price (TP): RM1.70) as the contribution from its retail division should remain stable in the long term on the back of positive rental reversion.

Besides, the outlook for the hotel division is also improving with expectation of higher tourist arrivals, it said.

Sunway REIT's earnings in the first quarter of fiscal 2024 dipped 9.8 per cent year-on-year (y-o-y) partly due to loss of income from Sunway Medical Centre and lower rental from Sunway Pyramid Mall as AEON exits the mall.

"Nevertheless, we see an improving earnings outlook for Sunway REIT as earnings from Sunway Pyramid should normalise from financial year 2025 onwards with reconfiguration exercise of the mall completing in financial year 2024.

"Besides, rental contribution from six hypermarkets that were acquired in April 2024 should lift earnings in 2H 2024," it said.

Meanwhile, MIDF Amanah also like Axis REIT (Buy; TP: RM2.02) for its exposure to industrial assets which is underpinned by healthy demand for industrial space.

"Its active acquisition will also spur earnings growth in the long term," the investment bank said.