Date of Report

25 October 2024

Broker Name

UOB Kay Hian

Company Overview

Pavilion REIT is a real estate investment trust (REIT) with a portfolio that includes the iconic Pavilion Shopping Mall and the Pavilion Office Tower.

Stock Data

• Share Price: RM1.58
• Target Price: RM1.76 (Previous TP: RM1.66)
• Upside: +11.4%
• Bloomberg Ticker: PREIT MK
• Shares Issued: 3,660.7 million
• Market Cap: RM5,756.2 million (US$1,335.5 million)
• 3-Month Average Daily Turnover: US$1.5 million
• 52-Week High/Low: RM1.59 / RM1.17

Major Shareholders

• Qatar Investment Authority: 27.6%
• Lim Siew Choon: 23.1%
• Employees Provident Fund: 12.1%

Financial Performance

3Q24 Results

• Revenue: RM207.3 million (+3% QoQ, +4% YoY)
• Net Property Income (NPI): RM131.9 million (+9.8% QoQ, +8.7% YoY)
• Core PAT: RM78.9 million (+17.6% QoQ, +11.8% YoY)
• Earnings Per Unit (EPU): 2.2 sen
• Dividend Per Unit (DPU): 0.0 sen (no dividend declared for this quarter)

Key Financials (Year to 31 Dec)

Stock Impact

• The results for 3Q24 were slightly below expectations due to weaker-than-expected performance from Pavilion Bukit Jalil (PBJ), which may miss its RM146 million NPI target for next year.
• The 3Q24 NPI margin improved to 63.6%, driven by higher margins from key assets like Pavilion KL, Pavilion Elite, and Intermark Mall.
• A stronger fourth quarter is anticipated due to the festive season, with occupancy at Pavilion KL remaining solid at 96.8%.

Earnings Revision/Risk

• Earnings forecasts for 2024-26 have been reduced by 2-6% due to lower expected contributions from PBJ.
• The expectation of a dilutive RM400 million placement exercise in 2025 has been removed, leading to an increase in DPU forecasts by 4-6% for 2025-26.

Valuation/Recommendation

• Maintain a “BUY” rating with a higher target price of RM1.76, based on an increased dividend forecast and a reasonable implied dividend yield of 5.5% for 2025.