This follows the office-retail property trust posting net property income of RM29.21 million for the second quarter ended June 30 (Q2 FY2023), marking a slight increase of 4.55% from RM27.94 million in the previous year.
In a note today, Hong Leong Investment Bank (HLIB) Research was bullish on the acquisition of Menara CelcomDigi, citing the enduring single tenancy arrangement and a favourable 8% rental yield.
Additionally, it considers Sentral REIT’s risk-to-reward assessment to be fairly balanced at this stage.
Nevertheless, Sentral REIT’s performance in Q2 FY2023 fell short of predictions, attributed to elevated property operational expenses and finance costs.
As a result, HLIB adjusted its target price (TP) to 75 sen, down from 84 sen previously, while maintaining its “hold” recommendation.
The revised TP was based on the FY2023 projected distribution per unit (DPU), aiming for a 9.7% yield.
In Q2 FY2023, Sentral REIT recorded a core net profit of RM17.6 million, marking a slight 0.2% decline compared to the previous quarter and a 4.4% decrease year-on-year (y-o-y).
This contributed to a cumulative total of RM35.3 million for the first half of this year (H1 FY2023), reflecting a 9.1% y-o-y decrease.
HLIB noted that these figures were lower than their projected estimates at 45%, yet they remained in line with the broader market predictions at 50%.
It anticipates that due to fierce competition within the office market, rental rates for office spaces in the Klang Valley are expected to continue experiencing downward pressure.
“As heightened cost pressures were not able to be passed down to tenants via upward revision in rental rates, we see muted earnings for office REITs,” said HLIB.
Likewise, Maybank Investment Bank Bhd envisioned enhanced earnings from FY2024f due to the acquisition of Menara CelcomDigi.
As a result, the research house maintained its “buy” recommendation and a TP of 91 sen, calculated using the dividend-discount model (DDM).
This valuation is underpinned by favourable net DPU yields ranging from 6.2% to 7.1% for the period between FY2023 and FY2023E.
Its Q2 FY2023 results were in line with projections, while the net profit for H1 FY2023 surpassed 49% of the company’s annual forecast and 50% of the consensus full-year estimate.
“We expect earnings to remain stable in H2 2023, with some ease at utilities expenses due to a slight reduction in imbalance cost pass-through (ICPT) surcharge rate. We maintain our FY2023-2025E earnings estimates,” it said.
At the close of trade, Sentral REIT’s share price was unchanged at 85 sen, valuing the group at RM911 million.