Rental reversion, improved occupancy to boost Sentral REIT’s FY2025 earnings — analysts

• In a note on Thursday, CIMB Securities said that the company's earnings are expected to grow 2.3% year-on-year (y-o-y), supported by rental reversion.

KUALA LUMPUR (Jan 23): Sentral Real Estate Investment Trust (KL:SENTRAL) is poised for modest earnings growth in fiscal year 2025 (FY2025), driven largely by rental reversion across the REIT’s portfolio, according to analysts.

In a note on Thursday, CIMB Securities said that the company's earnings are expected to grow 2.3% year-on-year (y-o-y), supported by rental reversion.

The research house added that Sentral REIT's FY2024 results were in line with expectations, coming in at 98% of the research house’s full-year forecasts.

Meanwhile, its positive outlook for FY2025F is underpinned by rental reversions across the REIT’s portfolio, particularly as a significant portion of its net lettable area is due for renewal.

Approximately 450,000 square feet or 18% of Sentral REIT’s committed net lettable area is set to undergo renewal in 2025, with the majority of these leases expiring in the second half of the year.

Notably, focus will be on its properties in Cyberjaya, a key area in the REIT’s portfolio.

Despite challenges in maintaining occupancy, the research house forecasted moderate earnings growth for the REIT in the coming year and maintained a “hold” call on Sentral REIT, with an unchanged target price (TP) of RM0.86.

Meanwhile, in a separate note, RHB Research expressed optimism over Sentral REIT’s blended occupancy rate, which is expected to improve in FY2025 as the REIT gradually fills vacancies left by tenants in Menara Shell, noting that this improvement should support the REIT’s earnings in the coming fiscal year.

The research house also noted that Menara Shell remains a key asset for Sentral REIT, considering its attractive location and long-term tenancy, which should appeal to prospective tenants.

However, RHB adjusted its earnings forecast for FY2025F, lowering this by 2% after revising rental assumptions for the upcoming period. 

Despite this revision, RHB maintained its "buy" call on Sentral REIT, with a target price of RM0.91. 

The research house continues to favour the REIT for its robust dividend yield of 8%, alongside its stable earnings outlook, it said.

In terms of Sentral REIT’s performance in FY2024, its revenue showed a notable (y-o-y) growth of 19%, driven by the acquisition of Menara CelcomDigi and a rise in rental rates from its Cyberjaya properties. However, occupancy rates declined to 84% as of end-FY2023, down from 89% at the close of FY2022, largely due to expiration of leases in Menara Shell.

According to Bloomberg, two analysts currently have a “buy” recommendation on Sentral REIT, while three have assigned a “hold” rating.

At the time of writing, Sentral REIT's shares were up half a sen or 0.6% to 80.5 sen, valuing the company at RM962.4 million.

EdgeProp.my is currently on the lookout for writers and contributors to join our team. Please feel free to send your CV to [email protected] 

Looking to buy a home? Sign up for EdgeProp START and get exclusive rewards and vouchers for ANY home purchase in Malaysia (primary or subsale)!