PavREIT earnings to remain subdued
KUALA LUMPUR: Pavilion Real Estate Investment Trust’s (PavREIT) earnings are expected to remain subdued in the financial year 2017 (FY17) due to high property expenses, analysts observed.
In a report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) maintained its earnings forecast for PavREIT’s FY17 and FY18.
It explained, “Earnings of Pavilion REIT is expected to remain subdued for FY17 due to high property expenses incurred.
“Nevertheless, the recently announced acquisition of Elite Pavilion Mall (242,000 square feet of net lettable are) is expected to be earnings accretive.”
Meanwhile, on PavREIT’s first nine months of the financial year 2017 (9MFY17) earnings, MIDF Research said its core net income of RM166.8 million came within expectations but fell short of concensus’ expectations.
“PavREIT recorded 3.2 per cent year-on-year (y-o-y) growth in 3QFY17 topline, mainly driven higher rental income from Pavilion KL shopping mall.
“Nevertheless, core net earnings in 3QFY17 declined by 6.7 per cent y-o-y mainly due to higher maintenance cost incurred for Pavilion KL shopping mall such as upgrading air conditioning system.
“That brought cumulative earnings in 9MFY17 to RM166.8 million, declining by 7.5 per cent y-o-y as higher property expenses coupled with higher borrowing cost offset the rental contribution from Intermark Mall and da:mén USJ mall.
“The lower cumulative earnings were also partially dragged by lower occupancy rates of Pavilion KL shopping mall in 1QFY17 due to reconfiguration of tenant mix,” it said.
Overall, MIDF Research maintained a ‘neutral’ rating on the stock.
It explained, “We continue to see unexciting earnings outlook for PavREIT, hence we are maintaining our ‘neutral’ stance on the company. Meanwhile, dividend yield estimate for PavREIT is at 4.1 per cent.”