KUALA LUMPUR: AmResearch has maintained its Hold call on Pavilion Reit (PReit) with a fair value of RM1.40 a share.
In a note on Friday, the research house said PReit’s 3QFY14 realised net profit of RM63mil brought its 9MFY14 realised net profit to RM175mil.
" It is in line with expectations, accounting for 78% and 77% of our and consensus earnings forecasts, respectively. Net property income (NPI) and realised net profit grew by 8.6% to RM212mil and 10.1% YoY to RM175mil, respectively, underpinned by higher rental reversion," it said.
It added that for 3QFY14, PReit’s overall property operating expenses were lower by 8% YoY at RM26mil.
This was due to the reversal of overprovision of assessment charges recorded in the 1HFY14 and recognition of credit/overcharge of electricity charges by Tenaga Nasional Bhd
.
NPI grew by 16% YoY as it was offset by the incurrence of maintenance work for a few advertising sites.
AmResearch said its balance sheet remained solid with a gearing of 16.4%.
"We make no changes to our FY14F-FY16F earnings. Our Hold call is premised on the lack of an immediate-term asset acquisition. Nonetheless, we believe that PReit is likely to acquire Pavilion Extension upon its completion in mid-2016. The stock is trading with a distribution yield of 5.1%, and at a spread of 125bps over the 10-year MGS’ yield," it noted.
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