Sentral REIT may sell assets to diversify portfolio

KUALA LUMPUR: Hong Leong Investment Bank (HLIB) suggests Sentral REIT may sell some properties to diversify its portfolio, with industrial and logistics assets being its top investment targets. The management's priority is portfolio diversification and asset recycling, not reducing gearing, which stood at 45.2% as of the third quarter ended September 30, 2026.

Vacant Sentral Building 2 has already attracted early-stage buyer interest, and Sentral REIT shows no plans to fit out the space. The bank sees other assets as attractive to potential buyers due to their location and size, but the selling timeline remains uncertain. Future acquisitions will focus on industrial and logistics properties, followed by healthcare and retail assets, with a preference for triple-net leases.

Lease renewals involving 15% of the REIT's net lettable area in the fourth quarter will significantly impact earnings for the financial year ending December 31, 2027. Sentral REIT's portfolio occupancy rose to 90% in the third quarter from 89% in the previous quarter. HLIB maintains a Buy recommendation on Sentral REIT with an unchanged target price of 73 sen, indicating a potential upside of 28.2% from 57 sen. The research firm also retains its earnings forecasts after Sentral REIT's third-quarter results met expectations.

Despite a 3.2% year-on-year decline in core net profit to RM19.7 million, revenue increased by 0.7%, driven by Arcoris Mont Kiara's acquisition on December 30, 2025. Property expenses grew by 8% due to the expanded portfolio and higher utility costs, leading to a 1.8% decline in net property income. Core net profit for the first nine months amounted to RM59.3 million, accounting for 73.6% of HLIB's full-year forecast and 73% of consensus estimates.