Pavilion REIT’s 1HFY22 core net income of RM120.2m came in within expectations of analysts, making up 53% and 54% of our and consensus full year estimates respectively.
Distribution per unit of 4.08sen (ex-date: 10th Aug 2022) was announced for 1HFY22.
The group showed strong earnings recovery. Sequentially, gross revenue was marginally higher (+2%qoq) due to higher rental income. Nevertheless, core net income was lower at RM55m (-15.7%qoq) due to higher utility cost and higher operating expenses.
On yearly basis, 2QFY22 core net income surged to RM55m (+169.4%yoy), bringing 1HFY22 cumulative core net income to RM120.2m (+132.7%yoy). The strong earnings recovery was mainly due to lower rental assistance to tenants and recovery in rental income following improvement in shopper footfall.
Notably, net profit income of Pavilion KL and Elite Pavilion Mall grew 57%yoy and 198%yoy respectively as footfall at the malls recovered strongly following reopening of all economic sectors.
Earnings forecast maintained
"We maintain our earnings forecast for FY22/23F. We remain positive on earnings outlook for Pavilion REIT as rental income is expected to recover in FY22/23F following the recovery in shopper footfall and reopening of country borders. Besides, earnings outlook is also expected to underpin by improving rental reversion outlook as tenant sales improve," says MIDF in its report on Pavilion Reit.
The analyst firm altogether maintained a BUY call on the company.
"We maintain our TP at RM1.56, based on Dividend Discount Model valuation. We see shopper footfall of Pavilion KL and Elite Pavilion Mall should continue supported by reopening of economy and higher tourist arrival following reopening of country borders.
"That would translate into better rental reversion outlook and support earnings growth going forward. Hence, we maintain our BUY call on Pavilion REIT. Meanwhile, distribution yield is estimated at 5.2%."