KUALA LUMPUR (Dec 27): AmInvestment Bank expects UOA Real Estate Investment Trust (KL:UOAREIT) to post a 14.3% quarter-on-quarter increase in its distributional income, on slightly higher gross rental income and lower property operating expenses.
This is as occupancy rate for Parcel B — Menara UOA Bangsar (MUB) is expected to rise to above 60% in the fourth quarter of financial year 2024 (4QFY2024), from 58% in 3QFY2024, the research house said.
UOA REIT has found anchor tenant replacement for 85% of the floor space across eight floors left vacant in early 2024, while another three floors left vacant in the third quarter have yet to be filled.
“Nevertheless, UOA REIT has prospects to lease out the vacant floor spaces,” AmInvest said.
UOA REIT’s net income fell to a two-year low of RM8.1 million in the second quarter due to the lower occupancy and refurbishment in MUB and UOA Damansara II.
Net income rebounded to RM10.5 million in the third quarter, and AmInvest sees it rising further to RM12 million on tenant replacement and as refurbishment has neared completion.
However, AmInvest said its “view of a limited distribution per unit growth in the near term is unchanged”.
“Oversupply of offices is expected to limit positive rental reversions while asset enhancement initiatives (AEIs) are required to be implemented to sustain existing and attract new tenants in aged office buildings,” it said.
Full-year net income is forecasted at RM43 million, down 20.1% year-on-year, AmInvest said.
The research house has maintained its ‘hold’ call on UOA REIT, with a target price of RM1.06, compared with its forecasted net asset value of RM1.45 per unit by end-2025.
“Room for positive rental reversions is limited due to the continued pressure on rental rates from the glut of office spaces,” it said.
At the time of writing, UOA REIT traded 1.6% lower at 91.5 sen, representing trailing dividend yield of 8.55% and price-to-book of 0.64 times. The counter is down over 16% this year.