Pavilion Reit (AR 2018)

Financial Highlight

• Stable growth of revenue and net property income(NPI) over the 5 years period. 
• Main reasons for the increase in revenue and NPI in 2018 is due to the acquisition of Elite Pavilion Mall from the executive chairman Tan Sri Lim Siew Choon & Qatar Holdings LLC for a consideration of RM 580 millions. 
• Those who bought Pavreit since its IPO has enjoyed a great dividend yield at almost 9%. 
• Total asset value and net asset value(NAV) continues to grow with NAV per unit at RM 1.31 as at 31 December 2019.
• Gearing ratio increase due to acquisition of Elite Pavilion Mall however is still well below its company policy of 50%

• 98% of Pavreit income are from retail and shopping mall while 2% are from offices. 
• Pavilion KL Mall remain as its anchor income contributor with 83.61% of net property income. 
• Pavilion KL Mall and Elite Pavilion Mall accounts for 90% of its income (Pavreit performance will mainly based on these 2 malls).
•  Net property income is 67.53% of its gross revenue. 

Performance Of The Rental Properties

Pavillion Kuala Lumpur:

• Net lettable area - 1,334,331 square feet
• Occupancy rate as at 31 December 2018 - 98.7%
• Gross revenue - RM 441 million
• Net property income - RM 313 million 
• Margin - 70.97%

Intermark Mall:

• Net lettable area - 222,565 square feet
• Occupancy rate as at 31 December 2018 - 94.4%
• Gross revenue - RM 29 million
• Net property income - RM 17 million 
• Margin - 58.62%

Da Men Mall*:

• Net lettable area - 434,938 square feet
• Occupancy rate as at 31 December 2018 - 74.4%
• Gross revenue - RM 30 million
• Net property income - RM 9 million 
• Margin - 30%
• Acquisition cost of Da Men Mall is RM 487 million however the market value as at 2018 is merely RM 310 million

*Despite continuous activities to promote the DA MEN Mall, a number of tenants have decided against renewal upon expiration of their tenancy as visitation to the neighbourhood mall still remains challenging.

Elite Pavilion Mall:

• Net lettable area - 241,831 square feet
• Occupancy rate as at 31 December 2018 - 96.7%
• Gross revenue - RM 43 million
• Net property income - RM 27 million 
• Margin - 62.79%

Pavilion Tower (Office):

• Net lettable area - 163,844 square feet
• Occupancy rate as at 31 December 2018 - 94%
• Gross revenue - RM 13 million
• Net property income - RM 8 million 
• Margin - 61.53%

Top 30 Shareholders

• Top 30 shareholders are all fund house with Tan Sri Lim Siew Choon and his wife as the biggest shareholder with 37.12% follow by Qatar Holdings LLC (35.66%) and EPF (5.13%)
• Top 30 shareholders accounted for 94.17% of Pavreit shares (meaning there are less than 5% of shares in the market)

Strength

• Its Pavilion Mall, Elite Pavilion Mall and Pavilion Office Tower is located at the most prime area in KL with occupancy rate of over 95%. 
• Stable growth and increase in net property income 
• Tan Sri Lim Siew Choon is experienced in this industry. He also owns WCT Holdings Bhd and Malton Bhd.  

Weakness

• Da Men Mall is not doing very well and is not doing according to its plan during acquisition. 

Valuation @ RM 1.80

No doubt that Pavreit is a stable real estate investment trust however at the price of RM 1.8, its DY is only 4.8% which is not very attractive as compared to other reits.