UOB Kay Hian Research has maintained its revenue and net profit forecasts on Pavilion-REIT.
PETALING JAYA: Pavilion Real Estate Investment Trust
’s (Pavilion-REIT) premium retail assets are less vulnerable to downward pressure on occupancy and rental rates, amid the rising headwinds in the retail sector on the back of sustained high inflation that hurts consumer spending.
The group will also benefit from the return of international tourists and higher tourist spending spurred by the weak ringgit, Kenanga Research said.
The research house has retained an “outperform’’ call on the stock, which is one of its top picks within the REIT sector.
It has also maintained a target price (TP) of RM1.59 a share for Pavilion-REIT.
However, the risks to Kenanga Research’s call include rising risk-free rate, lower-than-expected rental reversions, weaker-than-expected occupancy rates and loss of footfall to new rival malls.
While Kenanga Research retained its earnings forecast on the group, Hong Leong Investment Bank (HLIB) Research has cut its financial year 2024 (FY24), FY25 and FY26 forecasts by 7.4%, 7% and 6.5%, respectively, to account for lower gross revenue.
Pavilion-REIT reported second quarter of 2024 core net profit of RM67mil (down 19.3% quarter-on-quarter, up 6.7% year-on-year (y-o-y). This brought the first half of this year’s sum to RM150mil (up 13.1% y-o-y).
However, HLIB Research has maintained a “buy’’ call on the stock with a slightly lower TP of RM1.60 from RM1.63 a share.
It expects Pavilion REIT to continue to benefit from the higher tourist arrivals to Malaysia this year. Moreover, the stock offers an attractive projected FY24 dividend yield of 6.4%.
MIDF Research, which made no changes to its earnings forecast for FY24, FY25 and FY26, sees positive earnings prospects for Pavilion-REIT as earnings will be driven by positive rental growth of Pavilion KL Mall.
Furthermore, the growing contribution from Pavilion Bukit Jalil, which is expected to spur positive rental reversion and better occupancy rate, should also lift earnings in the near-term.
The research house also has a “buy’’ call on the stock with an unchanged TP of RM1.60 a share.
UOB Kay Hian Research, meanwhile, has maintained its revenue and net profit forecasts on Pavilion-REIT. It increased its dividend forecast by 3% to 7% for 2025 to 2026 on the back of a higher payout ratio of 95% to 102% from 90% to 95% previously.
It has kept a “buy’’ call with a TP of RM1.66 a share from RM1.47 a share.
Maybank Investment Bank Research has maintained its earnings forecasts on the stock with a TP of RM1.55 a share.
The brokerage firm believes that the near-term earnings growth forecast comes from both Pavilion KL, due to its prime location and Pavilion Bukit Jalil.
However, it remains cautious on Da Men Mall in Subang Jaya, which could continue to face stiff competition from surrounding malls.
