CGS has initiated coverage on Paradigm REIT with an “Add” recommendation and a target price of RM1.24, citing its attractive valuation, visible distribution per unit (DPU) growth and potential for further asset acquisitions.
The research house’s discounted dividend model (DDM)-based target price assumes a cost of equity of 8.2%, terminal growth rate of 1% and a proprietary discount of 3.1%.
Based on Paradigm REIT’s share price of RM0.92 as at Aug 13, 2026, CGS forecasts a FY2027 dividend yield of 9.2%, which it said is the highest among REITs under its coverage.
At its RM1.24 target price, the implied FY2027 dividend yield would be 6.8%, which CGS considers fair relative to Malaysian government bonds and the Malaysian REIT sector’s yield of about 7%.
CGS said the market appears to be underappreciating Paradigm REIT’s combination of attractive valuation and visible FY2026-FY2028 DPU growth.
It identified three key structural drivers: rental re-rating at Paradigm Mall Johor Bahru (PMJB), rising cross-border tourism supported by Visit Malaysia Year 2026 and the Johor Bahru-Singapore Rapid Transit System (RTS) Link, and improved accessibility to its Klang Valley malls following the completion of LRT3.
PMJB Seen Entering Multi-Year Growth Cycle
CGS expects PMJB to enter a multi-year earnings upgrade cycle, driven by rental catch-up, sustained tourism demand and active asset optimisation.
According to management, about 80% of PMJB’s space expiring in FY2026 has already been renewed, with positive rental reversions of around 30%, significantly above its earlier guidance of mid-teens growth.
The renewed leases are expected to commence from November and December 2026, with the bulk of the earnings uplift expected to materialise in FY2027.
CGS forecasts 14% year-on-year DPU growth in FY2027, supported by higher rental income.
The research house also expects increased footfall from Singaporean shoppers, post-pandemic rental normalisation and planned space reconfiguration to further strengthen PMJB’s position as a key growth driver for Paradigm REIT through FY2026-FY2028.
Hotel Acquisition Pipeline
Beyond organic growth, CGS sees a strong pipeline of potential asset acquisitions from Paradigm REIT’s sponsor as another source of growth.
The initial proposed acquisition is expected to comprise Première Hotel, Le Méridien Petaling Jaya and Hyatt Place Johor Bahru, with a combined value of approximately RM500 million and targeted for the first quarter of calendar year 2027.
CGS expects the hotel assets to be DPU-accretive, supported by long-term master leases and an estimated 7% gross rental yield.
The acquisitions are projected to contribute around RM25 million, or 12%, of FY2027 net property income (NPI), rising to RM33 million, or 15%, in FY2028.
CGS has incorporated the proposed hotel acquisitions into its forecasts, resulting in FY2027-FY2028 DPU estimates slightly above Bloomberg consensus.
Looking further ahead, the potential acquisition of Gateway @ klia2 could provide another medium-term catalyst for the REIT.
With gearing at only around 33%, CGS estimates Paradigm REIT has sufficient debt capacity to fund approximately RM800 million to RM900 million in future yield-accretive acquisitions.
Key Catalysts
CGS said an acceleration in asset acquisitions and stronger-than-expected rental reversions at PMJB could provide catalysts for a re-rating of Paradigm REIT.
However, downside risks include weaker occupancy rates and rental reversions, as well as delays in the proposed asset injections from its sponsor.
Overall, CGS believes Paradigm REIT’s combination of high dividend yield, improving rental income, tourism tailwinds and an acquisition pipeline provides investors with an attractive opportunity as market leadership broadens beyond traditional REIT names.
