Report Date: October 24, 2024
Broker: CGS International

Company Overview

Pavilion REIT (Real Estate Investment Trust) is a Malaysian-based REIT that focuses on owning and managing retail properties. The trust provides investors with exposure to high-quality retail assets, benefiting from strategic locations and robust tenant demand.

Recent Upgrade and Investment Thesis

The report resumes coverage on Pavilion REIT with an “Add” rating, reflecting a positive outlook for the stock. The target price (TP) has been raised to RM1.78, driven by the expectation of strong performance backed by several growth catalysts. The broker considers Pavilion REIT a proxy for stronger private consumption, increasing tourist arrivals, and accelerated earnings growth, particularly from its Pavilion Bukit Jalil property.

Key Growth Catalysts

1. Stronger Private Consumption: Pavilion REIT is set to benefit from increased consumer spending, which is expected to boost footfall and sales at its retail properties.
2. Increase in Tourist Arrivals: As tourism rebounds, the influx of visitors is likely to drive higher traffic at Pavilion REIT’s properties, supporting rental income and occupancy rates.
3. Accelerated Earnings Growth from Pavilion Bukit Jalil: The property, a significant asset in Pavilion REIT’s portfolio, is anticipated to contribute significantly to earnings growth. The REIT projects an 8.8% compounded annual growth rate (CAGR) in earnings per unit (EPU) over the fiscal years 2023-2026.

Dividend Yield Outlook

The report highlights that Pavilion REIT offers an attractive forecasted dividend yield of 6.0% for FY2025. This is seen as a compelling feature for income-focused investors seeking stable returns from dividend-paying stocks.

Conclusion

CGS International’s analysis reflects optimism for Pavilion REIT’s growth trajectory, backed by strong consumption trends, tourism recovery, and property-specific contributions from Pavilion Bukit Jalil. The raised target price and the anticipated dividend yield underscore the trust’s potential to deliver solid returns in the coming years.