Sentral-reit to gain from new assets in good locations

PETALING JAYA: Sentral Real Estate Investment Trust (REIT) may see a fall in its total occupancy rate as a tenancy in Menara Shell is set to expire soon.

However, upside to its occupancy rate will remain supported, namely by some newly acquired commercial properties in strategic locations.

RHB Research expects Sentral-reit’s blended occupancy rate to drop to 85% in the second quarter (2Q24), following the expiration of Menara Shell’s tenancy.

“We are not too concerned as the property is one of the REIT’S flagship, green-certified buildings, and has received enquiries from potential tenants. For now, we expect the space to be filled up by end of the year.

“For the financial year 2025, 18% of the REIT’S net lettable area will be up for renewal, mostly consisting of its Cyberjaya portfolio,” it said.

The REIT recently saw higher income from the newly acquired Menara Celcomdigi, Sentral Building 4, Sentral Building 3 and Platinum Sentral.

However, RHB Research noted the full quarter’s operating expense from Menara Celcomdigi was higher than expected.

Its cost of debt increased to 4.5% from 4.4% in 4Q23 due to the higher Kuala Lumpur Interbank Offered Rate or Klibor rate.

RHB Research maintained its “buy” call and a dividend discounted model derived target price of 91 sen, which implied an 8% financial year 2024 forecast yield.

It also noted any plans to reduce its gearing which is at 45% and close to the 50% gearing limit imposed by the Securities Commission would be positive for the traded unit share price.

“We think any disposal opportunity for Wisma Sentral Inai will be a re-rating catalyst for the REIT. The property is valued at Rm154mil or 6% of Sentral-reit’s asset values, which – if used to repay borrowings – could reduce the REIT’S gearing ratio to 41%,” RHB Research said.