REIT: PAVILION oh PAVILION

Pavilion REIT: A fashion-forward quarter (CIMB)
Pavilion REIT
Current RM1.38
Target RM1.55
A fashion-forward quarter

 At 77% of both our and consensus full-year numbers, Pavilion REIT's 9M12 core net profit trumped expectations, especially since 4Q should be even stronger due to Christmas retail sales and a full quarter’s contribution from the new Fashion Avenue.

Higher-than-expected rental reversions were behind the results deviation. We raise our forecasts and DDM-based target price for it. We also roll over our valuation to end-2013. The stock remains an Outperform, with the catalyst being a higher-than-expected rental reversion for 67% of Pavilion KL mall next year. FY13’s dividend yield of 5.4% should also support the share price.



Maiden contribution from Fashion Avenue
Fashion Avenue, a new fashion precinct consisting 35 new designer brands in Pavilion KL mall, started contributing to Pavilion REIT in Sep, which means that a full-quarter impact will only be seen in 4Q. But it helped to drive the 4.4% qoq rise in the topline to RM86.5m. Pavilion REIT declared a third interim DPU of 1.72 sen, bringing YTD DPU to 5.08 sen, also above our expectations as we expect a stronger 4Q due to seasonality as well as a full quarter's contribution from Fashion Avenue.

Strong 10% rental reversion Rental reversion for the Pavilion KL mall was a healthy 10%. It has already renewed almost all of this year’s expiring leases (19% of NLA). Visitor traffic improved 3-5% from 2011’s 31m visitors. Sales by Pavilion KL mall’s tenants are expected to rise by 3-5% this year. The mall is currently 98.5% occupied following the opening of Fashion Avenue on 3 Sep 2012.

Still at early stage of rental reversion
We believe that Pavilion Mall is at the early stage of its rental reversion cycle as it was opened in Sep 07. In its first cycle of rental reversions in 2010, it raised rental rates by 8.0-12.5%. We expect similar strength during its next major rental review in Sep 13 when 67% of the mall’s NLA comes up for renewal.



Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research, 

1 comments:

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