PETALING JAYA: The earnings outlook for UOA Real Estate Investment Trust (UOA-REIT) should remain stable given its minimal exposure to the retail sector, which has been affected by the pandemic.

Hong Leong Investment Bank (HLIB) Research in a report said UOA-REIT will focus on prudent capital management and improve the performance of its properties.

“Despite the resumption of economic activities and the reopening of national borders, we expect earnings to remain stable for UOA-REIT, given its minimal exposure to retail in contrast to mall-based REITs.

UOA-REIT owns and invests in a portfolio of commercial and office properties in Malaysia.

In its latest annual report, UOA-REIT said it will seek to diversify its real estate portfolio by property type and location.

“The group will focus on investing in properties that are primarily used for office, retail and residential purposes and will continue to seek opportunities in these types of properties.

“In addition, he may also seek out other properties that will offer attractive risk-adjusted returns.”

UOA-REIT recorded a net profit of RM16.02 million in its first quarter ended March 31, 2022, compared to a net profit of RM16.17 million in the previous corresponding period.

First quarter revenue was RM29.22 million compared to RM29.60 million a year earlier.

Compared to the corresponding quarter of last year, UOA-REIT said in a filing with Bursa Malaysia that gross rent decreased by approximately 1.3%, while total expenses decreased by approximately 1%. .

“The slight drop in gross rents is mainly due to the drop in the occupancy rate of old buildings. Earnings per share for the quarter under review decreased from 2.34 sen to 2.30 sen,” he said.

Commenting on its outlook for the remainder of the year, UOA-REIT said economic growth continues to impact occupancy and rental rates for its properties.

“It will take time for consumer sentiment to return to pre-pandemic levels and for the real estate sector to experience a recovery.

“Despite the market sluggishness, the manager is optimistic about the outlook for the real estate market, given the resumption of economic activities and the reopening of national borders.”

UOA-REIT added that it will continue to actively manage the portfolio of its properties and improve their performance.

The group said this will be done through active operating strategies to maximize return for unitholders and seek out timely acquisitions that meet its objectives.

HLIB Research, which maintains a “hold” call on the stock, said UOA-REIT’s earnings were in line with expectations.

“After accounting earnings adjustments and advancing our valuation to 2023, our target price is raised slightly to RM1.15 (from RM1.14).”