Sentral REIT's 4Q NPI up 30%, declares 0.68 sen DPU

• The improvement in gross revenue was also due to the impact of revenue straight-lining over the lease term under requirements of Malaysian Financial Reporting Standard 16 Leases, said Sentral REIT in a bourse filing.

KUALA LUMPUR (Jan 23): Sentral Real Estate Investment Trust (Sentral REIT)'s net property income (NPI) rose 30.21% to RM36.26 million for the fourth quarter ended Dec 31, 2023 (4QFY2023), from RM27.85 million a year earlier, on the back of higher revenue.

Gross revenue increased 28.24% to RM46.66 million from RM36.39 million in 4QFY2022, mainly due to higher revenue generated from Platinum Sentral, Menara Shell and newly acquired Menara CelcomDigi.

The improvement in gross revenue was also due to the impact of revenue straight-lining over the lease term under requirements of Malaysian Financial Reporting Standard 16 Leases, said Sentral REIT in a bourse filing.

Property operating expenses rose 21.8% to RM10.4 million, from RM8.54 million previously, mainly due to higher operating expenses incurred amid higher utility expenses for some of the properties under the portfolio and the inclusion of operating expenses for newly acquired Menara CelcomDigi.

Net profit stood at RM19.21 million, compared with a net loss of RM4.74 million in 4QFY2022.

The REIT declared a final gross income distribution per unit (DPU) of 0.68 sen, to be paid on Feb 29. This brings its total income distribution for FY2023 to 6.68 sen, compared with 6.82 sen for FY2022. 

For FY2023, Sentral REIT's NPI increased 8.87% to RM124.87 million, from RM114.7 million in FY2022, as gross revenue rose 10.01% to RM162.11 million from RM147.35 million, largely due to higher revenue generated from Platinum Sentral, Menara Shell and Menara CelcomDigi.

Full-year net profit expanded 39.09% to RM72.71 million, from RM52.27 million in FY2022. 

Commenting on its results, the REIT said it recorded an improvement in its portfolio occupancy to 89% as at Dec 31, 2023, compared with 86% in the previous quarter, due to the inclusion of Menara CelcomDigi into its portfolio. 

The RM450 million acquisition of Menara CelcomDigi in Petaling Jaya from Malaysian Resources Corp Bhd was completed in December last year.

On prospects, Sentral REIT said the Klang Valley office and retail markets are expected to remain challenging.

It said it will continue to focus on asset management and leasing strategies that are centred on cost optimisation and tenant retention in the current operating environment.

“Efforts will be intensified to market the available office spaces under the portfolio with the focus on bringing in new tenants from the IT, e-commerce, serviced office and shared services sectors,” it added.

In a separate statement, Sentral REIT Management Sdn Bhd (SRM) chairman Tan Sri Saw Choo Boon said Sentral REIT’s focus in 2024 will be on asset management and leasing strategies that are centred on cost optimisation and tenant retention, "while we continue to pursue growth by actively exploring acquisition opportunities based on a prudent acquisition strategy”. 

SRM chief executive officer Derek Teh Wan Wei said 282,000 sq ft or 14% of Sentral REIT’s total committed net lettable area will be up for renewal in 2024. 

“In line with our ongoing tenant retention strategies, we have initiated early renewal negotiations for some of these tenancies,” Teh said. 

In tandem with the growth in the property portfolio, Sentral REIT recorded a gearing ratio of 44.54% as at end-FY2023.

Proactive measures in the medium term through portfolio realignment and future refinancing exercises will be undertaken to rebalance the REIT's debt profile with its portfolio composition to yield a sustainable gearing ratio, said Teh.

The additional debt had also increased the REIT’s floating rate debt from 66% to 76% of its total debt. The REIT incurred additional debt of RM362 million to partly finance its acquisition of Menara CelcomDigi.

Sentral REIT units closed half a sen or 0.63% higher at 79.5 sen on Tuesday, giving the REIT a market capitalisation of RM950 million.

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