Maintain BUY

1Q22 earnings were within expectations. YoY revenue fell 4.2% mainly due
to non-renewal of tenants at Wisma Technip and QB3. Net profit growth
YoY however remained stable (-1.6%), partially helped by lower opex and
net financing costs. We adjusted lower our FY22-24E core net profit by
4.5%/3.2%/1.9% respectively, and moderate our DDM-TP to MYR1.22 (-
3sen). We continue to favour Sentral’s stable rental income from its longterm tenants. It also currently offers an above average 6.8% FY22E net

DPU yield (vs sector’s average of 5.2%). Maintain BUY.

Earnings cushioned by lower opex and financing costs
1Q22 core net profit of MYR20.4m was relatively flat YoY and QoQ,
accounting for 24% of our and consensus’ FY22E estimates. YoY revenue
fell 4% YoY mainly due to non-renewal of tenants at Wisma Technip and
QB3. However, earnings were cushioned by; (1) lower operating expenses
(-14%), and (2) lower financing expenses (-5%) attributed to debt
refinancing in Mar 2022 and early refinancing of a term loan which is only
due in Sept 2023. Portfolio occupancy rate as at end-1Q22 fell to 86%
(4Q21: 90%), with Wisma Technip and QB3’s occupancy dropping to 50%
and 68%, respectively (4Q21: 83%, 80%). Meanwhile, Platinum Sentral and
Menara Shell’s occupancy remained stable at 80% and 92%.

Lowering forecasts

Our FY22-24E net profit forecasts are adjusted lower by 4.5%/3.2%/1.9%
respectively as we adjust lower occupancies at the Wisma Technip and QB3
properties. Sentral has successfully renewed 56% of its leases due for
renewal in 1Q22 and is in the midst of negotiations for the balance of
leases up for renewal in 2022.

Earnings to remain resilient

We remain positive on Sentral’s office assets with tenants on long-term
leases such as Platinum Sentral, Menara Shell, QB1, QB4, QB2 and Tesco
Building. Elsewhere, gross gearing was a decent 0.37x (end-1Q22),
supportive of future asset acquisitions.