Sentral REIT’s third quarter results within expectations

KUCHING: Sentral Real Estate Investment Trust’s (Sentral REIT) third quarter of the financial year 2021 (3QFY21) came within expectations and its performance is expected to remain stable, analysts say.

In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) said, Sentral REIT’s 9MFY21 realised net income (RNI) of RM65.6 million came in within its expectation but above consensus’ expectations.

On a year-on-year (y-o-y) year to date (YTD) basis, it noted that its top-line was down slightly by three per cent due to lower revenue from QB3-BMW, Plaza Mont Kiara, Wisma Technip and Platinum Sentral.

However, RNI was up by eight per cent on lower operating cost (six per cent), lower financing cost (14 per cent) and gains on disposal of QB5 of RM3.8 million which was completed in April 2021.

On a quarterly basis, top-line bounced back up by 6.8 per cent, likely due to rental deferments or rebates given in 2QFY21, but bottom-line declined by 2.3 per cent with the absence of the RM3.8 million disposal gain. Its gearing remained stable at 0.37folds (compared with 0.38-folds in 2QFY21), the research team noted.

“The group’s portfolio occupancy remains relatively stable at 91 per cent. FY21 to FY22 will see minimal lease expiries of 22 ti 16 per cent of net lettable assets (NLA) while the issue of oversupply of office spaces in the Klang Valley remains.

“With minimal lease expiries, we believe that Sentral REIT would be able to at least see flattish y-o-y earnings growth. The group remains diligent in managing cash flows and exercising financial discipline and on the lookout for accretive acquisition opportunities should the situation arise given its healthy balance sheet,” Kenanga Research said.

Its earnings are also driven by stable organic growth and occupancy of circa 90 per cent on flattish-to-mildly positive reversions, it added.

All in, Kenanga Research retained its ‘outperformance’ rating on the stock.

“We continue to favour Sentral REIT for its resilient earnings which have remained stable throughout the pandemic in FY20 and 9MFY21 with earnings faring better than retail and hospitality MREIT peers. FY22 prospect is expected to be stable with minimal lease expiries, allowing the group to maintain its stable earnings and attractive gross yields of eight per cent compared with other large cap MREIT peers of 4.7 to 7.5 per cent,” it added.