SNB Capital determines top picks in Saudi REIT sector

SNB Capital reiterated Alinma Hospitality REIT Fund and Al Maather REIT Fund as its top picks in the Saudi REIT sector, thanks to their low leverage and thus stable operating cash flows, coupled with their lucrative yields and valuations as well as exposure to attractive sectors such as tourism.

According to the brokerage’s recent report, Saudi REITs are still under pressure, with their index falling 9.5% thus far, underperforming the market index.

In addition to the pressures resulting from the rise in interest rates, the weak performance was due to redirecting investments to high-returns sectors and attractive new share offerings,

This is besides market uncertainty and weak sentiment towards the sector due to the lackluster performance and the continuous downward revision of earnings, paired with the general market pressures, SNB Capital stated.

It expected that the decline in interest rates to lead to lower financing costs, which shall boost dividend payments while also accelerating the sector’s future performance, noting that this will have a gradual and not immediate impact.