Kenanga Research downgraded Malaysia's real estate investment trusts (REITs) to 'neutral' from 'overweight' as it believes there is limited room for further yield compressions.
"As investors seek safe havens in defensive stocks this year, we note that most Malaysia's REITs are trading at historically low gross yields, not to mention record low spreads to the 10-year Malaysian Government Securities (MGS) yields," the research house said in a note on Tuesday.
Assuming the 10-year MGS yields trend lower to 3.3 percent based on historical trends in 2013, and Malaysia's REITs continue to demand current record low spreads, the brokerage said it had increased the target prices on Malaysia's REITs under its coverage.
"However, our new target prices only provide less than 10 percent total returns, implying limited share price upsides."
Kenanga downgraded Capitalmalls Malaysia Trust to 'market perform' from 'outperform', though it raised the target price to 1.80 ringgit per share from 1.69.
It maintained 'market perform' on Sunway REIT , but raised the target price to 1.51 ringgit from 1.42. It also maintained 'market perform' on Axis REIT, with a higher target price of 3.08 ringgit.
"We prefer KLCC Property (outperform rating; target price of 6.87 ringgit) as an alternative to Malaysia's REITs as our target price reflects a REIT payout structure and a target 2013 gross dividend yield of 4.6 percent," it added.
0139 GMT
(Reporting by Yantoultra Ngui in Kuala Lumpur; yantoultra.ngui@thomsonreuters.com; Editing by Prateek Chatterjee)
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09:11 MALAYSIA STOCKS NEWS-Latexx shares surge after buyout offer from Austrian firm
Shares in Malaysian rubber glove maker Latexx Partners
surged 27.4 percent on Tuesday after Austrian firm Semperit AG Holdings made a 603 million ringgit ($196.58 million)takeover offer in cash.
The offer announced by the Austrian medical gloves maker on Monday is the third such deal for Latexx. It involves Semperit proposing to pay 2.30 ringgit per Latexx share and 1.77 ringgit per warrant.
Last year, the Malaysian firm received a 852 million ringgit buyout proposal from private equity firm Navis and another offer from Malaysian rival YTY Industry Holdings to merge some of its units in a deal valued at 1.37 billion ringgit.
0110 gmt
(Reporting by Niluksi Koswanage in Kuala Lumpur; niki.koswanage@thomsonreuters.com;)
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Keywords: MARKETS STOCKSNEWS MALAYSIA/REITS