PavREIT’s mall tenant take-up rate to be positive
Pavilion Real Estate Investment Trust’s (Pavilion REIT) financial year 2023 (FY23) results came in positively with its earnings growth meeting general consensus’ expectations.
For the upcoming financial year, analysts are positive that the REIT could continue to grow from the positive rental revision and rise in shopper footfalls at their malls.
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) said: “Pavilion REIT’s assets appear to be enjoying a reinvigoration as we noted higher reported tenancy ratios, supported by encouraging footfalls.
“Pavilion KL closed with 95 per cent occupancy, Intermark Mall at 90 per cent with even DA MEN Mall reporting favourably at 73 per cent.
“It is noted that Pavilion Bukit Jalil reported an occupancy rate of 88 per cent.”
Creeping into end-2024 to 2025, the research team pointed out that the group might enjoy greater rental reversions in accordance to the expiry of most tenancy schedules.
“That said, we hold our breath for a meaningful increase in rental rates as it could be fluid in accordance to market conditions, which we anticipate could face resistance in the near term, no thanks to the implementation of new taxes and targeted subsidies.
“On the flipside, we are encouraged by Pavilion REIT’s rights of first refusal granted for the possible acquisition of fahrenheit88 mall which is directly opposite its key Pavilion KL asset,” it added.
Meanwhile, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) said: “We like Pavilion REIT as its flagship malls in KL will continue to benefit from higher tourist arrival.
“Rental reversion outlook for most of its malls is positive and hence will drive earnings growth in the near-term.”
On Pavilion REIT’s FY23 performance, the research team noted that sequentially, 4QFY23 core net income was higher at RM81.7 million, in line with higher topline.
“The higher sequential earnings were mainly due to better contribution from Pavilion KL Mall and Elite Pavilion Mall as a result of yearend shopping spree.
“Besides, the earnings growth was also partly attributed to lower property operating expenses,” it said.
On yearly basis, 4QFY23 core net income was higher, bringing full year core earnings to RM285.3 million.
“The higher earnings were attributed to contribution from Pavilion Bukit Jalil which was acquired on June 1, 2023.
“Besides, earnings growth was also supported by positive rental reversion at Pavilion KL Mall and Elite Pavilion Mall which saw improvement in shopper footfall and tenant sales.
“Nevertheless, core earnings per unit recorded marginal growth of 1.4 per cent due to dilutive impact from private placement,” it added.