UOA-REIT’S earnings poised to remain stable

PETALING JAYA: UOA Real Estate Investment Trust’s (UOA-REIT) earnings outlook is expected to remain stable in light of its minimal exposure to the retail segment, which was affected by the pandemic.

Hong Leong Investment Bank (HLIB) Research in a report said UOA-REIT will be focusing on prudent capital management and enhancing the performance of its properties.

“Despite the resumption of economic activities and reopening of national borders, we expect earnings to remain stable for UOA-REIT, given its minimal retail exposure unlike mallbased REITS.

UOA-REIT owns and invests in a portfolio of commercial and office real estate in Malaysia.

In its latest annual report, UOA-REIT said it will seek to diversify its real estate portfolio by property and location type.

“The group will focus on investing in properties that are primarily used for office, retail and residential purposes and will continue to look for opportunities in these types of properties.

“In addition, it may also look into other properties that will provide attractive risk-adjusted returns.”

UOA-REIT posted a net profit of Rm16.02mil in its first quarter ended March 31, 2022, compared with a net profit of Rm16.17mil in the previous corresponding period.

Revenue in the first quarter stood at Rm29.22mil compared with Rm29.60mil a year earlier.

Against the corresponding quarter last year, UOA-REIT said in a filing with Bursa Malaysia that gross rental had decreased by approximately 1.3%, whereas total expenditure decreased by approximately 1%.

“The slight decrease in gross rental was mainly due to the decline in the occupancy rates of the older buildings. Realised earnings per unit for the quarter under review decreased from 2.34 sen to 2.30 sen,” it said.

Commenting on its prospects for the remainder of the year, UOA-REIT said economic growth continues to impact the occupancy and rental rates of its properties.

“It will take time for consumer sentiment to be restored to pre-pandemic levels and the real estate industry to see a recovery.

“Despite prevailing subdued market sentiment, the manager is hopeful on the outlook of the property market, given the resumption of economic activities and reopening of national borders.”

UOA-REIT added that it will continue to actively manage the portfolio of its properties and enhance their performance.

The group said this would be done via active operating strategies to maximise the yield for unitholders and to source for opportune acquisitions that meet its objectives.

HLIB Research, which is maintaining a “hold” call on the stock, said UOA-REIT’S earnings were within expectations.

“Post book earnings adjustments and rolling forward our valuation to 2023, our target price is raised marginally to RM1.15 (from RM1.14).”