KUALA LUMPUR: Sentral REIT has recorded a retention rate of 66 per cent for the year ended December 31, 2021 (FY21) with about 511,000 sq ft or 28 per cent of its total net lettable area (NLA) is due for renewal in 2022.

Hong Leong Investment Bank Bhd (HLIB) analyst Farah Diyana Kamaludin said Sentral REIT had initiated early renewal negotiations for some tenancies. 

"Sentral REIT is relatively shielded from Covid-19 impact due to its large exposure to office (88 per cent of portfolio) as opposed to retail," she said in a report today.

She said the company's main focus would be on asset enhancement initiatives, cost optimisation and tenant retention to overcome the challenging pandemic environment.

"Sentral REIT's core profit of RM84.5 million or 4.4 per cent higher in FY21 was within our and consensus' expectations," Farah Diyana added.

Its FY21 revenue eased 3.0 per cent to RM160.6 million mainly due to lower contribution from QB3-BMW, Plaza Mont Kiara and Platinum Sentral. 

HLIB said the decline in property operating expenses was slightly cushioned the fall in net property income, while the reduction in total expenses was mainly driven by lower finance costs but was capped by the higher administrative expenses.

HLIB said Sentral REIT's overall improvement was driven by lower total expenses, which mitigated the fall in revenue given weak contribution from QB3-BMW, Plaza Mont Kiara and Platinum Sentral. 

"Overall occupancy remains stable at 90 per cent, while gearing stands at 36.9 per cent."

HLIB has maintained a "Buy" call on Sentral REIT with a target price of 95 sen, based on FY22 forward on targeted yield of 8.3 per cent.

"We like Sentral REIT for its attractive high dividend yield of 8.6 per cent to 8.7 per cent for FY22-FY23 and its relatively more resilient earnings amid Covid-19 given minimal retail exposure unlike mall REITs," it said.