PETALING JAYA: Sentral Real Estate Investment Trust (Sentral-REIT) is expected to continue posting flattish earnings in the second quarter for the financial year ending Dec 31, 2025 (2Q25) given projected minimal changes in occupancy rates and cost structure.
Sentral-REIT posted lower 1Q25 net profit and revenue of RM19.61mil and RM47.46mil respectively.
This was down from RM19.9mil and RM49.69mil in 1Q24, respectively.
The lower revenue was said to be due to softer contributions from Menara Shell and Sentral Building 3, as well as adjustments from MFRS 16 lease accounting.
The REITs net property income also dipped by 4% to RM36.47mil during the quarter.
CIMB Securities said the results came in line with its expectations, meeting 24% of its and 23% of consensus’ full-year forecasts.
Looking ahead, CIMB Securities said the REIT would undergo concentrated lease renewal exercise in the second half of 2025 (2H25) as 460,000 sq ft of the group’s committed net lettable area would be up for renewal – especially its properties in Cyberjaya.
It also planned to diversify its portfolio by reducing reliance on office assets and expanding into retail, healthcare, education and industrial segments within Klang Valley in the medium term.
“While this strategy could help mitigate softness in the office sector, heightened competition for quality assets in the Klang Valley may pressure asset yields and the REIT’s elevated gearing level,” CIMB Securities noted.
The research house maintained a “hold” call on Sentral- REIT but lowered the target price to 80 sen from 86 sen considering the persisting oversupply in the office segment.
“The influx of new supply in the office market may continue to hinder Sentral- REIT’s ability to improve its occupancy rate,” it added.
Similarly, Hong Leong Investment Bank Research said the prevailing oversupply office market in Klang Valley is expected to exert downward pressure on rental rates, resulting in flat to low single-digit rental reversion.
“However, Sentral REIT
has been displaying resiliency in navigating this tough operating landscape, seeing its consistent track record of earnings growth with a five-year compound annual growth rate of 2.1%,” it said.