Date of Report

25 October 2024

Broker Name

UOB Kay Hian

Company Overview

Pavilion Bukit Jalil (PBJ) is a key asset within the Pavilion REIT portfolio, contributing significantly to its overall revenue and net property income (NPI).

Financial Performance

3Q24 Results

• Contribution to Revenue: PBJ reported revenue of RM51 million per quarter in the first two quarters of 2024, with a slight increase to RM53 million in 3Q24.
• Occupancy Rate: The occupancy rate at PBJ fell to 86.6% in 3Q24, down from around 88% in the earlier quarters of 2024.
• NPI Target: PBJ may struggle to achieve an annualized NPI of at least RM146 million in 2025, as indicated by current performance trends.

Management Guidance

• Management has provided a new occupancy guidance of 90% by December 2024, which is lower than the previous expectation of 90-92%.
• Rental reversion for PBJ is expected to be between 5-10%, which may lead to an estimated quarterly revenue increase to RM60-61 million.

Risk Factors

• The performance of PBJ has been slower than anticipated, attributed to a decline in occupancy and higher maintenance costs following the defect liability period.
• If the NPI margin does not stabilize, there could be implications for the overall valuation of Pavilion REIT.

Conclusion

Despite the challenges faced by Pavilion Bukit Jalil, management remains optimistic about improving occupancy rates and rental income as the market recovers.