KUALA LUMPUR: Kenanga Research said Pavilion REIT's FY17 realised net income (RNI) and dividend payout came in within its and consensus expectations.
It has maintained its outperform call on the stock with target price of RM1.84.
On-year, GRI was up 7% on repositioning of tenants at Pavilion KL on the back of positive rental revisions, full year contributions from Damen Mall and INtermark Mall and electricity collection fees from Damen Mall.
However, RNI declined by 1% due to higher operating cost from maintenance, tenancy cost, provisions of doubtful debts, marketing cost for sponsorship of the 2017 SEA Games and increased financing cost.
Kenanga Research sees 24% to 52% of net leasable area expiring in FY18-19, on single-digit reversions.
"Although lease expiries in FY19 appear lumpy, we are not overly concerned as the bulk is from PKL, which should have no issue maintaining full occupancy on decent reversions," it said.
It added that it is positive on the acquisition of Elite Pavilion, which is expected to be completed in FY18 and will contribute about 8% to FY18E earnings and 7.6% to dividend per unit.
Kenanga Research said the Fahrenheit88 acquisition is still on the table, pending the sponsor's intention to sell while Pavilion REIT is eyeing cap rates closer to 6.5%. The REIT could also potentially acquire third party assets from WCT.
Limited time offer:
Just RM5 per month.
