Stronger FY27 earnings for AME Reit on rental reversions, says HLIB

The Hong Leong Investment Bank Bhd (HLIB) anticipates stronger FY27 earnings for AME Real Estate Investment Trust (AME Reit), with rental reversions playing a key role. The bank highlights that AME's recent history suggests greater potential in Senai Airport City (SAC), as rental rates there remain significantly below current market levels. SAC's passing rents of RM1.85 to RM1.90 per square foot are over 35% below market rates of over RM2.50 psf.

AME Reit's management has secured about 40% reversions on replacement tenants in the past, confirming this market gap. This indicates substantial organic upside for upcoming lease expirations in the segment. HLIB also notes that the i-Park SAC 34 acquisition, completed in June 2026, will contribute 9 months of revenue in FY27. This acquisition includes a built-in 3% annual step-up through FY30.

The Indahpura cluster, on the other hand, was structurally under-rented due to legacy pre-IPO contracts. This has created a multi-year catch-up runway for rental reversions that are already stronger than those in SAC. A recent renewal with an existing tenant achieved over 30% rental uplift, far exceeding comparable SAC renewals of 11 to 20%.

Management plans to replicate this strategy across upcoming expiries, which will unlock more reversion upside. Defensive master-leased dormitories will help maintain baseline yields, leaving the build-to-lease i-Park @ SAC project to drive the next earnings inflection starting in FY29. HLIB maintains a Buy recommendation on AME Reit with a target price of RM1.67.