By LYDIA NATHAN / Pic By ARIF KARTONO
ANALYSTS are turning more positive on the outlook for Pavilion Real Estate Investment Trust’s (REIT) malls as shopper volume has seen a pick-up despite closed borders.
RHB Investment Bank Bhd (RHB Research) noted the uptick in volume points to earnings growth, especially for the financial year ending 2022 (FY22).
In its report, RHB Research stated that Pavilion REIT’s FY20 results were in line with its expectations, supported in part by its strong fourth-quarter (4Q) performance last year.
Footfall reached 90% of the pre-pandemic levels as dependency on tourists dropped and was aided by more local shoppers.
“We think the lessened dependency on tourists can be sustained and signals a positive turning point. With the falling infection rates and inoculation programme in motion, we believe Pavilion REIT’s malls will see shopper volume increasing over the next 12 months,” the investment bank said.
Additionally, the reopening of Malaysia’s borders is expected to push forward this trend positively as many transport analysts predict it will take place in the 2Q of 2021 (2Q21) at the earliest.
Located in the middle of Bukit Bintang, Pavilion Kuala Lumpur saw a steep rise in the number of customers, particularly on weekends and public holidays.
RHB’s analyst visited the mall and noted from security personnel there that the headcounts on weekends and public holidays go well above 10,000, while weekdays saw heavier lunch crowds and footfall of 5,000 to 6,000 people.
“With the returning office crowd, we think the mall’s weekday performance will be supported by lunch hour traffic. We also note occupancy at Pavilion has remained stable during the past year, which is more than 90%.”
“Despite the challenges brought forth by Covid-19, Pavilion only saw a marginal downward revision of 0.2% in its asset value in FY20, a testament to its robust quality,” it said.
However, Da Men Mall is most likely to see persisting low occupancy for the time being, as it fell to 69% in 2020 from 72% in 2019.
The research house said nevertheless, it remains positive that management’s aim in turning the mall into an “edutainment centre” for children and families will bear fruit in the medium term.
“Mall staff have also revealed there are 300 customers validating parking tickets over the weekends. On top of that, with Dadi Cinemas due to open in the 2Q21, the prospect of attracting quality tenants and, hence, shoppers to the mall is higher,” it said.
In line with this, RHB said it has upgraded its call to ‘Buy’ from ‘Neutral’, raising its FY22 and FY23 earnings to 16% and 17% respectively, with a target price of RM1.75.
“Risks will include the re-impositions of the Movement Control Order and a delay in the vaccination progress,” research house said.