Malaysia Results Review
Sentral REIT (SENTRAL MK): Holding Ground In a Tough Market; Keep BUY
8 August 2025
- Maintain BUY and DDM-derived MYR0.93 TP, 16% upside and c.9% FY26F yield. Sentral REIT’s 1H25 results were in line with expectations. We like the REIT underpinned by its stable earnings outlook and wide yield spread following the recent rate cut. Further re-rating catalyst could come from the potential disposal of the vacant Wisma Sentral Inai, which, based on an estimated valuation of MYR150m, would help pare down its gearing to 39%. This report marks the transfer of coverage to Tai Yu Jie.
- Within expectations. 1H25 core profit of MYR39.7m (-1.7% YoY) was in line, meeting 48% and 52% of our and consensus full-year estimates respectively. 2Q25 DPU amounted to 3.2 sen (2Q24: 3.2 sen), while 2Q25 gearing stood at 44% (2Q24: 45%).
- Results review. YoY, 1H25 revenue dipped slightly by 2.1% to MYR94.3m on lower contributions from Menara Shell after a tenant left in Jun 2024. That said, 1H25 NPI margin expanded slightly by 0.5ppts to 77%, thanks to cost optimisation, particularly on utilities and staff costs across the property portfolio. In addition to a lower interest expense (-1.9%) following an interest rate swap arrangement, 1H25 core profit declined by a smaller margin of 1.7% to MYR39.7m. QoQ, 2Q25 revenue was flattish (+0%) at MYR47.1m, mainly due to stable occupancy and minimal lease activity during the period. With lower operating costs incurred for some properties, 2Q25 core profit rose slightly by 2.4% QoQ to MYR20.1m.
- Outlook. We expect revenue and occupancy to remain stable sequentially, with most of the leases due in 3Q25 already renewed in advance. That said, 3Q25 profit could see some upside from interest savings following the recent rate cut, given 38% of the REIT’s debt is on a floating rate basis. Looking beyond the near term, we believe downside risk to occupancy remains minimal, as most of the leases expiring in FY25 (which account for 21% of NLA) are held by long-term tenants in Cyberjaya, Menara Shell, and Platinum Sentral – the REIT’s key flagship assets, and hence, non-renewal risk should be low. Additionally, the recently acquired Arcoris Plaza (expected to complete by 4Q25) will help diversify the REIT’s asset mix and reduce its reliance on the challenging office segment.
- Forecast and ratings. Post results, we maintain our earnings forecasts and DDM-derived MYR0.93 TP (includes a 0% ESG premium/discount). Our TP implies an FY26F yield of 7.9%, offering a spread of 450bps over the 10-year Malaysian Government Bond yield.
- Key downside risks to our outlook are lease non-renewals, and lower-than-expected rental reversions.
Target Price (Return): MYR0.93 (+16%)
Price (Market Cap): MYR0.80 (USD226m)
ESG score: 3.0 (out of 4)
Avg Daily Turnover (MYR/USD): 0.28m/0.06m
Analysts
Tai Yu Jie
+603 2302 8132
tai.yu.jie@rhbgroup.com
Loong Kok Wen CFA
+603 2302 8116
loong.kok.wen@rhbgroup.com
| Share Performance (%) | |||||
|---|---|---|---|---|---|
| YTD | 1m | 3m | 6m | 12m | |
| Absolute | 0.6 | 2.6 | 4.6 | 2.6 | 0.0 |
| Relative | 6.8 | 2.3 | 5.2 | 5.7 | 3.2 |
| 52-wk Price low/high (MYR) 0.73-0.82 | |||||
Overall ESG Score: 3.0 (out of 4)
E Score: 3.0 (GOOD)
S Score: 2.7 (GOOD)
G Score: 3.3 (EXCELLENT)
Please refer to the ESG analysis on the next page
Note: Small cap stocks are defined as companies with a market capitalisation of less than USD0.5bn.
Forecasts and Valuation
| Forecasts and Valuation | Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F |
|---|---|---|---|---|---|
| Total turnover (MYRm) | 161 | 191 | 198 | 211 | 213 |
| Net property income (MYRm) | 124 | 147 | 150 | 160 | 162 |
| Reported net profit (MYRm) | 74.2 | 79.9 | 82.9 | 89.1 | 91.4 |
| Total distributable income (MYRm) | 74.2 | 79.9 | 82.9 | 89.1 | 91.4 |
| DPS (MYR) | 0.07 | 0.06 | 0.07 | 0.07 | 0.07 |
| DPS growth (%) | (2.1) | (4.8) | 3.9 | 7.4 | 2.6 |
| P/B (x) | 0.64 | 0.69 | 0.69 | 0.69 | 0.68 |
| Dividend Yield (%) | 8.4 | 8.0 | 8.3 | 8.9 | 9.1 |
| Return on average equity (%) | 5.6 | 5.8 | 6.0 | 6.4 | 6.5 |
| Return on average assets (%) | 3.1 | 3.1 | 3.2 | 3.3 | 3.4 |
Emissions And ESG
Trend analysis
Total emissions remained largely stable. The overall energy intensity in FY24 increased slightly by 3% compared to FY22 before the acquisition of Menara CelcomDigi.
| Emissions (tCO2e) | Dec-22 | Dec-23 | Dec-24 | Dec-25 |
|---|---|---|---|---|
| Scope 1 | 16 | 16 | na | |
| Scope 2 | 11,632 | 11,192 | 11,104 | na |
| Scope 3 | – | 15,024 | 15,162 | na |
| Total emissions | 11,632 | 26,231 | 26,281 | na |
Latest ESG-Related Developments
Sentral REIT has acquired Menara CelcomDigi which is a certified LEED Gold Green Building. The REIT also has two other green certified buildings in its portfolio – Menara Shell and Platinum Sentral. Platinum Sentral was recertified as a Gold LEED-certified green building in 2024.
ESG Unbundled
Overall ESG Score: 3.0 (out of 4)
Last Updated: 27 May 2025
E Score: 3.0 (GOOD)
Sentral REIT has managed to reduce their overall GHG emissions and energy consumption by 4.9% in FY22, and targeting a 2% YoY reduction moving forward. In FY23, the REIT is upgrading the air-condition system in Menara Shell, and upgrading car park lightings in Plaza Mont’ Kiara.
S Score: 2.7 (GOOD)
70% of Sentral REIT’s workforce are females, and they provide sufficient training to its employees through MRCB Training Academy, MRCB Learning Zone and Industrial Practical Trainings. To ensure health and safety, they also conduct activities with external parties such as BOMBA.
G Score: 3.3 (EXCELLENT)
We view positively their establishment of a “Policy on Giving and Receiving Gifts” and the commitment to the Corruption-Free Pledge by the Malaysian Anti-Corruption Commission. Directors’ tenure range between 4-6 years on average.
ESG Rating History
Financial Exhibits
Key drivers
- Higher-than-expected demand for office space;
- Inorganic growth opportunities from its sponsor.
Key risks
- Downside risks:
- Lease non-renewals;
- Lower-than-expected rental reversions.
Company Profile
Sentral REIT is a mid-cap MREIT that focuses on office/commercial assets. Assets are largely concentrated in the Klang Valley and Cyberjaya areas.
Financial summary
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Recurring EPS (MYR) | 0.07 | 0.07 | 0.07 | 0.07 | 0.08 |
| EPS (MYR) | 0.07 | 0.07 | 0.07 | 0.07 | 0.08 |
| DPS (MYR) | 0.07 | 0.06 | 0.07 | 0.07 | 0.07 |
| BVPS (MYR) | 1.25 | 1.16 | 1.16 | 1.17 | 1.17 |
| Return on average equity (%) | 5.6 | 5.8 | 6.0 | 6.4 | 6.5 |
| Weighted avg adjusted shares (m) | 1,078.90 | 1,195.50 | 1,195.50 | 1,195.50 | 1,195.50 |
Valuation metrics
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Recurring P/E (x) | 11.63 | 11.96 | 11.53 | 10.73 | 10.47 |
| P/E (x) | 11.63 | 11.96 | 11.53 | 10.73 | 10.47 |
| P/B (x) | 0.6 | 0.7 | 0.7 | 0.7 | 0.7 |
| FCF Yield (%) | 9.1 | 7.7 | 7.5 | 8.1 | 8.4 |
| Dividend Yield (%) | 8.4 | 8.0 | 8.3 | 8.9 | 9.1 |
| EV/EBITDA (x) | (5.31) | (3.74) | (3.69) | (3.47) | (3.47) |
| EV/EBIT (x) | (5.31) | (3.74) | (3.69) | (3.47) | (3.47) |
Income statement (MYRm)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Total turnover | 161 | 191 | 198 | 211 | 213 |
| EBITDA | 109 | 129 | 133 | 142 | 144 |
| Operating profit | 109 | 129 | 133 | 142 | 144 |
| Net interest | (35) | (49) | (50) | (53) | (52) |
| Pre-tax profit | 74 | 80 | 83 | 89 | 91 |
| Recurring net profit | 74 | 80 | 83 | 89 | 91 |
Cash flow (MYRm)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Change in working capital | 14 | (5) | (5) | (5) | (6) |
| Cash flow from operations | 540 | 76 | 74 | 80 | 82 |
| Capex | (462) | (2) | (2) | (2) | (2) |
| Cash flow from investing activities | (462) | (2) | (2) | (2) | (2) |
| Dividends paid | (71) | (77) | (78) | (82) | (86) |
| Cash flow from financing activities | 350 | (388) | (78) | (82) | (86) |
| Cash at beginning of period | 80 | 87 | 84 | 98 | 111 |
| Net change in cash | 429 | (315) | (5) | (4) | (6) |
| Ending balance cash | 508 | (227) | 79 | 94 | 105 |
Balance sheet (MYRm)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Total cash and equivalents | 87 | 84 | 98 | 111 | 125 |
| Total investments | 2,522 | 2,523 | 2,523 | 2,593 | 2,593 |
| Total assets | 2,616 | 2,616 | 2,629 | 2,712 | 2,727 |
| Short-term debt | 0 | 341 | 341 | 341 | 341 |
| Total long-term debt | 1,165 | 825 | 833 | 912 | 921 |
| Total liabilities | 1,263 | 1,230 | 1,239 | 1,318 | 1,328 |
| Shareholders’ equity | 1,353 | 1,386 | 1,390 | 1,394 | 1,398 |
| Total equity | 1,353 | 1,386 | 1,390 | 1,394 | 1,398 |
| Net debt | 1,078 | 1,082 | 1,077 | 1,142 | 1,136 |
| Total liabilities & equity | 2,616 | 2,616 | 2,629 | 2,712 | 2,727 |
Key metrics
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Revenue growth (%) | 8.2 | 18.6 | 3.4 | 6.6 | 0.9 |
| Recurrent EPS growth (%) | 0.2 | (2.8) | 3.8 | 7.4 | 2.6 |
| Operating EBITDA margin (%) | 67.8 | 67.7 | 67.2 | 67.6 | 67.6 |
| Net profit margin (%) | 46.1 | 41.8 | 42.0 | 42.3 | 43.0 |
| Dividend payout ratio (%) | 97.1 | 95.1 | 95.2 | 95.2 | 95.2 |
| Capex/sales (%) | 286.6 | 1.2 | 1.0 | 0.9 | 0.9 |
| Interest cover (x) | 2.87 | 2.41 | 2.45 | 2.47 | 2.53 |
Results At a Glance
Figure 1: SENTRAL’s results summary
| FYE Dec (MYRm) | 2Q24 | 1Q25 | 2Q25 | QoQ (%) | YoY (%) | 1H24 | 1H25 | YoY (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 48.1 | 47.1 | 47.1 | 0.0 | (2.0) | 96.2 | 94.3 | (2.1) | Lower revenue YoY from lower occupancy rate in Menara Shell. Lower operating expenses attributed to lower utility and staff costs |
| Net property income (NPI) | 37.0 | 36.1 | 36.4 | 0.8 | (1.6) | 73.6 | 72.5 | (1.4) | |
| Interest expense | (13.1) | (13.0) | (13.0) | 0.2 | (0.9) | (26.5) | (26.0) | (1.9) | Lower average cost of debt following an interest rate swap arrangement |
| Interest income | 0.8 | 0.8 | 0.8 | (3.8) | (1.1) | 1.5 | 1.6 | 4.4 | |
| Associates | 0.0 | 0.0 | 0.0 | nm | nm | 0.0 | 0.0 | nm | |
| EI | 0.0 | 0.0 | 0.0 | nm | nm | 0.0 | 0.0 | nm | |
| Others | (4.1) | (4.4) | (4.0) | (7.2) | (2.1) | (8.2) | (8.4) | 2.6 | |
| Pretax profit | 20.5 | 19.6 | 20.1 | 2.7 | (1.9) | 40.4 | 39.7 | (1.7) | |
| Tax | 0.0 | 0.0 | 0.0 | nm | nm | 0.0 | 0.0 | nm | |
| Minority Interest | 0.0 | 0.0 | 0.0 | nm | nm | 0.0 | 0.0 | nm | |
| Net Profit | 20.5 | 19.6 | 20.1 | 2.7 | (1.9) | 40.4 | 39.7 | (1.7) | |
| Core Profit | 20.5 | 19.6 | 20.1 | 2.7 | (1.9) | 40.4 | 39.7 | (1.7) | In line with expectations |
| Core earnings per unit (sen) | 1.7 | 1.6 | 1.7 | 2.4 | (2.3) | 3.4 | 3.3 | (1.8) | |
| Dividends per unit (sen) | 3.2 | 0.0 | 3.2 | nm | (1.6) | 3.2 | 3.2 | (1.6) | Dividends announced semi-annually |
| NPI Margin (%) | 76.9 | 76.7 | 77.2 | 76.5 | 77.0 | ||||
| Pretax Margin (%) | 42.7 | 41.6 | 42.7 | 42.0 | 42.2 | ||||
| Net Margin (%) | 42.7 | 41.6 | 42.7 | 42.0 | 42.2 |
Recommendation Chart
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-05-28 | Buy | 0.93 | 0.76 |
| 2025-05-12 | Buy | 0.91 | 0.77 |
| 2025-01-23 | Buy | 0.91 | 0.80 |
| 2024-11-07 | Buy | 0.91 | 0.80 |
| 2024-08-08 | Buy | 0.91 | 0.81 |
| 2024-05-09 | Buy | 0.91 | 0.81 |
| 2024-01-24 | Buy | 0.91 | 0.80 |
| 2023-11-10 | Neutral | 0.87 | 0.84 |
| 2023-08-10 | Neutral | 0.89 | 0.85 |
| 2023-07-26 | Neutral | 0.92 | 0.84 |
| 2023-05-12 | Neutral | 0.92 | 0.85 |
| 2023-01-20 | Neutral | 0.92 | 0.90 |
| 2022-11-11 | Neutral | 0.94 | 0.88 |
| 2022-08-23 | Neutral | 0.97 | 0.96 |
| 2022-05-13 | Neutral | 1.00 | 0.96 |
Disclosures and Important Information
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Investment Research Disclaimers
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This report may contain forward-looking statements which are often but not always identified by the use of words such as “believe”, “estimate”, “intend” and “expect” and statements that an event or result “may”, “will” or “might” occur or be achieved and other similar expressions. Such forward-looking statements are based on assumptions made and information currently available to RHB and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement to be materially different from any future results, performance or achievement, expressed or implied by such forward-looking statements. Caution should be taken with respect to such statements and recipients of this report should not place undue reliance on any such forward-looking statements. RHB expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
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DISCLOSURE OF CONFLICTS OF INTEREST
RHB Investment Bank Berhad, its subsidiaries (including its regional offices) and associated companies, (“RHBIB Group”) form a diversified financial group, undertaking various investment banking activities which include, amongst others, underwriting, securities trading, market making and corporate finance advisory.
Analyst Certification
The analyst(s) who prepared this report, and their associates hereby, certify that: (1) they do not have any financial interest in the securities or other capital market products of the subject companies mentioned in this report, except for:
| Analyst | Company |
|---|---|
(2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
