UOA Real Estate Investment Trust (UOAREIT) faced a challenging second quarter of 2024, with core profit after tax (PAT) falling by 30.6% quarter-on-quarter and 41.7% year-on-year, totalling RM8.1 million for the period. The first half of 2024 saw a core PAT of RM19.8 million, which was below expectations, making up only 40.2% and 33.7% of the respective forecasts by the company and consensus.

According to Malacca Securities, UOAREIT's office space portfolio continues to adapt to several changes, including the replacement of an anchor tenant at Menara UOA Bangsar and upcoming upgrades at Menara UOA Centre and UOA II. Despite a stronger market presence and increased inquiries, the office space market remains cautious due to a shift towards hybrid work models, leading to a forecasted flat rental rate environment.

Malacca Securities maintains a SELL recommendation on UOAREIT, setting a target price of RM0.93. The target price is based on a price-to-earnings (P/E) ratio of 14.0x applied to the forecast earnings per share (EPS) of 6.64 sen for the Fiscal Year 2025 Forecast (FY25F).

The valuation reflects the current uncertainties and challenges in the office space sector, despite UOAREIT's ongoing adjustments and upgrades.