Mixed calls on Pavilion REIT
KUALA LUMPUR: Pavilion Real Estate Investment Trust’s (Pavilion REIT) recovery in the first half of this year could be affected by Da Men Mall, which posted a RM2.2 million loss at net property income level for the first quarter.
CGS-CIMB Research analyst Sharizan Rosely said this was weighed down by its occupancy rate, which was likely lower than the 67 per cent achieved at end the of financial year 2020.
Sharizan said Da Men Mall’s loss could widen in the second half as the Parkson department store planned to exit the mall by the middle of this year.
“Although three replacement tenants are expected to open soon, there could be a few months of impact from the untenanted space of 40,000 sq ft.”
He said other retail assets saw a four per cent to 22 per cent yearon-year drop in revenue but remained profitable.
“Expiring leases in financial year 2021 make up 11 to 41 per cent of total net lettable area.”
He said revenue loss risks from rental assistance/rebates should be lower in the year ending Dec 31, 2021, compared with an estimation of RM87 million in financial year 2020.
“Over 50 per cent of retailers/tenants are operating compared with 12 per cent during the first Movement Control Order,” he said.
He expected Pavilion REIT to continue focusing on tenant retention strategies, which may lead to flattish rental reversion in financial year 2021, given some nonrenewal of leases as at the end of the first quarter of this year.
CGS-CIMB Research has retained its “hold” call on Pavilion REIT with an unchanged target price of RM1.41 as potential share price upside from an expected retail recovery in the second half of this year could be capped by Da Men’s underperformance.
“Financial years 2021 to 2023 dividend yields of 4.4 to five per cent should be supportive of the share price.”
RHB Investment Bank Bhd analyst Loong Kok Wen said the ongoing inoculation drive would lead to further normalisation of shopper traffic and better earnings in the second half of this year and into financial year 2022.
“We maintain a ‘buy’ call on Pavilion REIT with a new target price of RM1.70 from RM1.75, with 21 per cent upside and about 4.0 per cent financial year 2022 yield.”