Pavilion REIT posts net profit RM47.8m in 1Q

KUALA LUMPUR (May 7): KUALA LUMPUR: Pavilion Real Estate Investment Trust Bhd (Pavilion REIT) recorded profit of RM47.8 million in its first quarter ended Mar 31 on the back of RM85.3 million revenue.

Earnings per unit was 1.59 sen, while net assets per unit was 95.51 sen.

Reviewing its performance, Pavilion REIT said on Monday that distributable income for the period under review amounted to RM50.6 million or 1.68 sen per unit, consisting of realised income of RM47.8 million and non-cash adjustments of depreciation, amortisation of borrowings transaction cost of RM0.3 million and surplus cash arising from 50% of manager’s management fee payable in units of RM2.3 million.

On its prospects, it said the REIT manager was confident that 2012 would be an equally successful year for Pavilion REIT with its asset enhancement initiative and the office tower being fully tenanted by middle of this year.

“Barring any unforeseen circumstances, the Manager expects Pavilion REIT to meet the 2012 projected distribution per unit of 5.73 sen as disclosed in the prospectus,"

It reported a net property income of RM60.5 million while management fees and borrowing costs incurred were RM4.6 million and RM8.3 million respectively.

Pavilion RREIT was listed on Dec 7 last year.



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Pavilion REIT’s bigger Christmas gift

Pavilion REIT (Feb 9, RM1.16)
Maintain outperform with target price of RM1.27: At 107% of forecast, earnings for the short 25-day quarter post listing were within expectations as it is a seasonally strong quarter. We tweak our numbers for updated balance sheet items but maintain our dividend discount model-based target price and reiterate our “outperform” call.

Pavilion’s 4QFY11 was only a 25-day quarter as the stock was listed on Dec 7, 2011. December is a seasonally strong month as Christmas festivities and year-end school holidays typically boost retail sales.

Pavilion declared a dividend per unit of 0.44 sen. A positive surprise was the RM18 million revaluation gain for Pavilion KL, which helped raise Pavilion’s net asset value to RM2.87 billion or 96 sen per unit.

Another nice surprise was the 12.5% increase in retail sales from RM1.6 billion in 2010 to RM1.8 billion in 2011. As shopper traffic was flattish year-on-year (y-o-y) at 31 million, this implies higher retail sales per shopper.

This is a positive development as it suggests that the quality of the shopper traffic has improved. Higher retail sales is good news for Pavilion as turnover rent typically comprises about 4% of total rental revenues.

Pavilion enjoyed 5% to 6% rental reversion for the 7% of tenancies that expired in 2011. We believe that Pavilion Mall, which opened in 2007, is still at an early stage in its rental reversion cycle.

In its first cycle of rental reversions in 2010, rental rates were raised by 8% to 12.5%. We expect similarly strong rental reversions during its next major rental review in 2013 when 67% of net lettable area comes up for renewal. — CIMB IB Research, Feb 9


This article appeared in The Edge Financial Daily, February 10, 2012.



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Pavilion REIT: A Malaysian retail icon

Pavilion REIT (Jan 19, RM1.09)
Initiate coverage at RM1.09 with a hold rating and target price of RM1.10: Pavilion REIT’s (PavREIT) key attraction lies in its asset portfolio and the jewel in its crown, Pavilion KL Mall. Located in the heart of Kuala Lumpur’s prime tourist and shopping district, this mall caters predominantly for the upper middle to high-income group, and is one of only four prime retail malls in the country. We initiate coverage on PavREIT with a “hold” rating and RM1.10 discounted-cash flow-based (DCF) target price. It currently trades at a 5.5% yield.

PavREIT’s appeal is enhanced by its status as the second largest Malaysian real estate investment trust (M-REIT) by market capitalisation (RM3.27 billion) and asset size (RM3.5 billion). The portfolio comprises Pavilion KL Mall (RM3.4 billion) and Pavilion Tower (RM100 million). Given its relatively young assets of four years in age, there is scope for growth in rental yields.

With its low debt-to-asset ratio of 20%, there is potential to leverage another RM2.2 billion for immediate yield accretive acquisitions. PavREIT has been granted right of first refusal to purchase two other malls and an extension of the Pavilion KL Mall worth about RM1.5 billion, which are only expected to be ready for injection from 2H13 onwards.

Pavilion KL Mall has a diversified and sizeable tenant base of over 450, which comprises mainly regional and international brand names. No single tenant contributes over 10% of total revenue, we estimate. With 67% of occupied net lettable area expiring only in 2013, its near-term earnings base is resilient. The mall has been chalking up higher average rentals per sq ft despite opening for business at the onset of the global financial crisis in September 2007.

With its status as the second largest M-REIT, hands-on management team and its superior asset quality, PavREIT deserves a premium valuation. We value PavREIT at RM1.10, based on DCF valuation method. This implies a 2012 gross dividend yield of 5.5% (against CapitaMalls Malaysia Trust’s 5.9% and Sunway Real Estate Investment Trust’s 5.8%). — Maybank IB Research, Jan 19


This article appeared in The Edge Financial Daily, January 20, 2012.



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Maybank Research positive on Pavilion REIT, TP unch RM1.10

KUALA LUMPUR (Jan 20): Maybank Investment Bank Research is positive on Pavilion REIT's latest asset enhancement initiatives.

It said on Friday that Pavilion REIT is transforming the existing TANGS Fashion Lifestyle Store area (68,000 sq ft net lettable area or 5% of Pavilion Mall's total NLA) into a new high street fashion precinct, which will enhance the rental yield.

“Significant contributions should come in from 2013 onwards. No change in our earnings forecasts for now. Our DCF-based TP is unchanged at RM1.10. Hold,” it said.



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Retail-focused REIT fairly resilient

The listing of Pavilion REIT earlier this month is likely to have attracted more investor interest to the entire asset class. Real estate investment trusts (REIT) are widely regarded as relatively defensive investing options, which would be appealing under the prevailing uncertainties over the health of the global economy.

To be sure, a prolonged and severe economic downturn may eventually affect property prices and rental incomes. On a positive note, the property sector rode out the 2008 global financial crisis none the worse for wear. Indeed, many of the listed REIT continued to recognise revaluation gains on their portfolio of assets during this period.

Hence, while there could emerge some rental pressure in select segments of the market, the office segment for instance, overall expectations for property prices remain on a fairly even keel for now. That said, most market observers are fairly upbeat on the prospects for retail properties, particularly for shopping malls that are well managed in choice locations, on the back of expectations that domestic consumer spending will continue to expand.

Hektar proposes new acquisition
Hektar REIT (RM1.30) is one of the earliest REIT to be listed on Bursa Malaysia — back in December 2006 — and the first that is focused on properties used primarily for retail purposes.

Its initial portfolio consisted of two suburban shopping malls, Subang Parade in Subang Jaya and Mahkota Parade in Malacca. Wetex Parade in Muar was added to the trust’s portfolio in 2008. The three investment properties — with total net lettable area of some 1.1 million sq ft — are valued at a combined RM752 million. The average occupancy rate stood at 95.5% at end-2010.


Earlier this month, Hektar proposed to add two other shopping malls to its portfolio - the Landmark Central Shopping Centre in Kulim and Central Square Shopping Centre in Sungai Petani, Kedah. The shopping malls are valued at a combined RM181 million and have net lettable area totalling some 582,000 sq ft. Upon completion, Hektar’s total investment properties will rise to roughly RM933 million.

To part-finance the purchase, Hektar has proposed a rights issue to raise some RM98.4 million. Based on the current unit price, the rights issue will
likely be on a basis of about one-for-four.

The proposed acquisition is expected to be finalised by 2Q12. Post-acquisition, Hektar’s gearing is estimated at around 44% while net asset value (NAV) is estimated at about RM1.29 per unit. Total units in circulation will expand to about 400 million.

Hektar has made three interim income distributions of 2.5 sen per unit each so far this year. Assuming the same level of income distribution as 2010, totalling 10.3 sen per unit, yields are estimated at 7.9% at the current price.

This is higher than yields for the three other retail-focused REITs currently listed on the local bourse, Sunway REIT, CMMT and Pavilion REIT, based on prevailing prices. This could be attributed in part to the relatively larger asset sizes and liquidity for its peers. Indeed, the more recent listings of the similar and larger retail-focused REITs have taken attention away from Hektar.

Newly acquired assets to start contributing positively for Sunway REIT
Sunway REIT remains the largest listed REIT on the local bourse in terms of total assets. Following the successful acquisition of Putra Place, its portfolio of assets has expanded to 11, from eight upon listing in July 2010, valued at a combined RM4.38 billion.

Sunway REIT acquired the three properties, The Mall, Putra Place office tower and the former Legend Hotel, in a public auction in April 2011. However, due to a legal wrangle with the former owner, the trust did not secure full possession and control of the properties until end-September. As a result, earnings in the past two quarters were weighed down by higher expenses, which included interest costs and legal fees, with losses totalling some RM6.6 million.

Now that the issue has been resolved, Sunway REIT expects positive contributions from its latest acquisition for the current financial year ending June 2012. Occupancy for Sunway Putra Mall stood at about 66% at end-September, and is expected to rise to some 82% upon the completion of new leases with the remaining occupants. Meanwhile, the master lease agreement for Sunway Putra Hotel has been finalised and the hotel will start to contribute in the current quarter under new management. Occupancy at Sunway Putra Tower averaged at 90.4% for the quarter ended September 2011, which the property manager expects will inch higher over the next few months.

Thus, we should see improved incomes for Sunway REIT. The trust made a first interim income distribution of 1.75 sen per unit in November. Assuming total income distribution of roughly 7.2 sen per unit for FY12, investors will earn yields of 6.4% at the current price of RM1.13.

With gearing at just about 35%, below the industry guideline of 50%, Sunway REIT’s balance sheet is relatively healthy and would give the trust room to for additional leverage for future acquisitions.


Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.


This article appeared in The Edge Financial Daily, December 21, 2011.



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Pavilion REIT a new benchmark

KUALA LUMPUR: In a clear sign of rapidly rising property values and rentals for Klang Valley malls, the listing of Pavilion REIT earlier this month has set a new valuation benchmark in the industry. The value of its Pavilion KL Mall exceeds by a wide margin those of other malls injected into real estate investment trusts (REIT), and yet offers decent yields.

Based on the REIT’s purchase consideration of RM3.19 billion and net lettable area of 1.335 million sq ft, Pavilion KL is valued at RM2,390 per sq ft (psf) — the highest for a mall injected into a REIT, according to a study by The Edge Financial Daily. The mall’s appraised value is even higher at RM3.415 billion or RM2,558 psf.

This is over four times that of Subang Parade — the first mall to be listed in a REIT — which was injected into Hektar REIT at a mere RM589 psf when it was listed four years ago. Subang Parade, which had 475,022 sq ft of net lettable area, was injected into the REIT at RM280 million, slightly below its then appraised value of RM290 million.

The valuation for Pavilion KL is 85% higher than Sunway Pyramid’s RM1,365 psf, despite the latter being situated in a premium location, with high rental rates and good patronage. Sunway Pyramid forms part of Sunway Real Estate Investment Trust (SunREIT), which was listed in July 2010.

However, neighbouring retail locations within the city centre stand as a more suitable comparison for Pavilion KL. A more immediate peer would be Suria KLCC, which is in the stable of KLCC Property Holdings Bhd (KLCCP), one of a few companies to routinely revalue its properties every year, resulting in more up-to-date valuations.

According to its annual report, Suria KLCC mall has an appraised value of RM3.47 billion and a net lettable area of about one million sq ft. That implies a valuation of RM3,470 psf, a 36% premium to Pavilion KL.

However, it should be noted that KLCCP’s share price of RM2.96 last Friday was well below its book value of RM5.68. This means the market is valuing its properties at only 0.52 times, resulting in a implicit value of RM1,804 psf for Suria KLCC, well below Pavilion KL’s.

By comparison, Pavilion REIT was trading at RM1.05 last Friday, some 12% above its book value of 94 sen upon listing on Dec 6, 2011.

The value of Pavilion KL is also higher than Sungei Wang Plaza’s RM1,607 psf and The Mines Shopping Centre’s RM737 psf. Both Sungei Wang and Mines Shopping Centre are owned by CapitaMalls Malaysia Trust (CMMT), which was listed in the middle of last year.

The value of these retail properties remains high despite the perceived oversupply of shopping centres in the Klang Valley, which CB Richard Ellis Research (CBRE) said accounts for 41.7% of the country’s shopping centre space. Together with Johor and Penang, these areas possess 67.4% of Malaysia’s shopping centres.

According to the Valuation and Property Services Department (JPPH), Kuala Lumpur shopping centres had an occupancy rate of 83.7% and Selangor 86.8% in 2010, both above the estimated national average of 77.5%.

“For prime centres within the Klang Valley, CBRE data shows that the occupancy in Kuala Lumpur is 92.9% while Selangor is 95.4%, leading to an overall prime occupancy rate in the Klang Valley of 94.7%,” said CBRE in a recent report.

For the current year, JPPH estimates 18.1 million sq ft in net lettable retail space is under construction, resulting in a 15.9% increase in retail stock by the year 2013, assuming a three-year construction period, said CBRE.

“With the growing number of malls in the Klang Valley, not all perform favourably and only a select few do well,” said a market observer.

CBRE said the total retail supply in the Klang Valley grew 4.4% to 42.3 million sq ft last year, and another four million sq ft is expected this year, with the bulk to be located in secondary locations such as newly completed townships.

Pavilion REIT’s two properties — Pavilion KL and Pavilion Tower, a 20-floor office building adjoined to the former — are both strategically located at the heart of Jalan Bukit Bintang. The company also holds the rights of first refusal (ROFR) to several properties including a six-storey retail mall to be developed in USJ, Subang Jaya.

“In terms of location, we are looking to further increase our presence in the prime Bukit Bintang area through our current assets as well as two of the ROFRs granted, for Farenheit88 and the proposed extension of Pavilion KL. However, there are limited retail assets in this specific area and it is also our plan to evaluate retail assets in the Klang Valley and other key localities within Malaysia,” CEO Philip Ho told The Edge Financial Daily. Ho noted that the company’s low loan-to-value (LTV) ratio of 20%, well below the 50% cap, provides the financial flexibility to resort to additional debt in order to fund future acquisitions.

Affin Investment Bank noted in an earlier report that a gearing ratio of 30% to 35% would allow the company to raise between RM360 million and RM540 million in debt.

“Going forward though, subject to such acquisition opportunities, we can definitely consider a higher LTV ratio, which is in line with industry norms,” said Ho.

Market observers note that any potential acquisition is unlikely to take place within the immediate term, hence efforts to raise funds via debt or placements for this purpose will only take place from 2014 onwards.

In the meantime, the company will rely on Pavilion KL which forms nearly 96% of its total asset value.

“Pavilion KL is relatively new and having only commenced operations in 2007, we believe there is significant room for improvement on rental yields, net lettable area and other asset enhancement initiatives. The company will be able to provide investors with growth opportunities from its existing portfolio as well through the potential acquisition of additional retail properties,” said Ho.


This article appeared in The Edge Financial Daily, December 19, 2011.




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Pavilion: New REIT on the block

Pavilion Real Estate Investment Trust made a solid debut on Bursa Malaysia last week. The trust unit rose as high as RM1.04 and was the most actively traded counter on its first day of trading. It has since retraced slightly to RM1.02, but remains comfortably above the initial public offering price of 90 sen.

Interest in the REIT is unsurprising given prevailing uncertainties in Europe and the potential impact on the health of the global economy. Currently, the general consensus is that the global economy will continue to grow in 2012, albeit at a slower pace. However, the eurozone debt crisis remains a wild card and further deterioration in the situation could
throw even modest expectations into disarray.

Meanwhile, the latest 3QFY11 earnings reporting season for companies listed on the local bourse was muted, weighed down by the gloomier outlook. A fair percentage of results have fallen short of expectations and we could see further earnings downgrades over the next few months.

As such, many investors are staying on the defensive, picking companies with more resilient businesses and earnings as well as higher than market average dividend yields. In view of the slowing economic growth, interest rates are unlikely to head higher anytime soon. In fact, central banks have started to loosen monetary policy in recent days. REITs are among the highest yielding instruments on the local bourse and most have fairly low beta relative to the broader market.

Portfolio valued at RM3.54 billion
Pavilion REIT’s portfolio consists of only two properties — Pavilion Kuala Lumpur Mall and Pavilion Tower — valued at a combined RM3.54 billion.

Pavilion Mall is the among the few premium fashion shopping malls in the country, catering for the mid- to high-end segment of the population. The shopping centre also attracts more than its fair share of tourist numbers, thanks to its location in the heart of the Golden Triangle and commercial business district.

The shopping mall is valued at RM3.42 billion and has a total net lettable area of almost 1.34 million sq ft. Occupancy rate for Pavilion Mall has averaged above 98% over the past
four years.

Pavilion Tower is a 20-storey office block connected to the mall. Contributions from Pavilion Tower are small relative to the REIT’s total revenue.

The trust intends to stay focused on properties used solely or predominantly for retail purposes. It has the rights of first refusal for two other shopping malls — fahrenheit88
(located across the street from Pavilion Mall) and a yet-to-be developed mall in Subang Jaya — as well as for the future expansion of Pavilion Mall.

This retail property market segment is, arguably, among the most resilient given that consumer spending is expected to remain fairly robust despite the global financial turmoil.

Indeed, rental rates for well-managed and well-located shopping malls have been trending higher, even through the 2008 global financial crisis.
This, compared to say, earnings risks for REIT exposed to the commercial market segment are erceived to be higher on the back of expectations of excess office space supply coming onto the market in the next few years.

Comparing retail-focused REIT
There are now 15 REIT listed on the Bursa Malaysia. Aside from Pavilion REIT, some of the other primarily retail-focused REIT are Sunway REIT, CapitaMalls Malaysia Trust (CMMT) and Hektar REIT.

In terms of total asset size, Pavilion REIT is second only to Sunway REIT. While the shopping mall accounts for nearly all of Pavilion REIT’s turnover, Sunway REIT has a more diversified portfolio. Retail properties account for roughly 73% of the latter’s turnover with the largest earnings contributor being Sunway Pyramid Shopping Mall in Bandar Sunway, an 324ha integrated township in the Klang Valley. The hospitality and office sectors contribute the remaining 17% and 10% of turnover.

Both CMMT and Hektar are pure retail-focused REIT. The former owns four shopping malls, including Sungei Wang Plaza, just a stone’s throw away from Pavilion Mall. The shopping

centre is one of the oldest in the country but has continued to draw traffic despite the sharp increase in the number of newer malls.

CMMT has done quite well since its listing in July 2010, currently trading at around RM1.40 per unit compared with its IPO institutional price of RM1.

Hektar owns three shopping malls — Subang Parade, Mahkota Parade in Malacca and Wetex Parade in Muar — valued at a combined RM752 million.

Pavilion REIT intends to distribute all of its income from the listing date through December 2012. Based on its forecast earnings, distribution per unit is estimated at 5.73 sen next year. That translates into gross yield of roughly 5.6% based on the prevailing price of RM1.02, in line with our estimated yield for CMMT but lower than that for Sunway REIT and Hektar.


Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.



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Rights issues by REITs a tough sell?

KUALA LUMPUR: It remains to see whether investors will warm up to recent proposals by Malaysian real estate investment trusts (REITs) to embark on rights issues for fundraising.

This comes as Hektar REIT and AmFirst REIT separately proposed rights issues in recent months. The former is doing so to fund new asset acquisition while the latter is seeking to reduce its bank borrowings. CapitaMalls Malaysia Trust (CMT) also recently told The Edge Financial Daily that it is considering a rights issue to raise fresh capital.

Analysts and market observers said it is generally undesirable for REITs to embark on rights issues as investors expect dividends from REITs instead of having to plough in more capital.

“Effectively, they are asking investors to spend more on their stock in these uncertain market conditions,” said a property analyst.

However, judging from the price performance of both Hektar REIT and AmFirst REIT, investors have not reacted negatively to the news. This, surprisingly, is in contrast to investors’ harsh treatment of Singapore-listed REITs that embarked on rights issues.

According to analysts, the reason why Malaysian REITs are now turning to rights issues to raise funds, instead of the usual way of borrowing or unit placement, could be because their gearing is already near the 50% threshold (of total asset value) permitted for a REIT to borrow, or that the capital they seek to raise is larger than what can be achieved with a placement exercise.

In Hektar REIT’s case, its gearing ratio is 43.4%, just below the 50% limit, based on its total debt of RM347 million and total assets of RM799.47 million as at Sept 30. AmFirst’s REIT’s gearing as at Sept 30 was 39.8% based on total borrowings of RM419.6 million and total assets of RM1.053 billion.

On Dec 8, Hektar REIT proposed a renounceable rights issue to raise gross proceeds of about RM98.4 million. Proceeds from the rights issue will be used to partially fund the acquisition of two shopping malls in Kedah for RM181 million cash.

Hektar REIT added that it would also obtain bank borrowings of up to RM87.1 million to purchase the assets. Note that it held cash and cash equivalents of RM21.3 million as at Sept 30.

The REIT has yet to finalise the actual number of rights units and entitlement basis will be determined later based on the final issue price of the rights unit.
Hektar REIT added that it will procure a written irrevocable undertaking from its substantial unitholders to fully subscribe for their entitlements, failing which underwriting arrangements would be made.

AmFirst REIT’s proposed rights issue, set on a three-for-five basis, is expected to raise gross proceeds of about RM218.8 million, based on an illustrative issue price of 85 sen per unit. The proceeds are to be used to pare down borrowings.

CapitalMalls Malaysia Trust, which also manages The Mines shopping mall, recently said it is also considering a rights issue to raise fresh capital.

AmFirst said the rights unit issue price is expected to be fixed at a discount of no more than 20% to the theoretical ex-rights price of the unit. “The discount on the issue price of the rights unit is intended to reward unitholders for their continuous support of the fund,” AmFirst said.

Thus far, investors have not reacted negatively to the REITs proposal to conduct rights issues. The unit prices of both Hektar REIT and AmFirst REIT are still traded near their peaks.

“It could be because the unit prices are currently near historical highs, and more interestingly, at the current high prices they still offer rather good yields as well [Hektar REIT at 7.6% and AmFirst at 8.6% historical yield], so unitholders are happy,” said a market observer.

Other than that, he explained that there is still strong demand for REITS in times of market volatility, especially among institutional shareholders.
“Pavilion REIT has gained 13.6% since last week’s IPO to RM1, and the yield is now only 5.7%. So, the management of REITs thought maybe a rights issue is a good idea,” he said.

The scenario is different in Singapore.

K-REIT Asia, a unit of the Keppel Land group, saw its unit priced plunge 9.7% to S$0.857 sen on Oct 18 after it announced plans to raise S$976.3 million (RM2.4 billion) through a 17-for-20 rights issue. Most of the funds raised by the REIT will be used to buy a 87.5% stake in Ocean Financial Centre (OFC) from its parent Keppel Land Ltd.

It was reported that investors didn’t like the pricing for the OFC deal, and the fact that it was a related party deal. It wasn’t entirely because K-REIT Asia had proposed to acquire it via rights issue funding.

“At the end of the day, REIT managements have to justify why they have to do a rights issue to ask for more money from the unitholders. While institutional shareholders are okay with a rights issue, it could be a turn-off for minority shareholders,” said a market observer.



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Pavilion REIT to expand domestically

KUALA LUMPUR: Malaysia’s largest retail real estate investment trust Pavilion REIT is looking to expand by acquiring assets in Penang, Johor and the Klang Valley, according to news reports.

“We will evaluate any financially-viable investment opportunity that comes around,” said Philip Ho, CEO of Pavilion REIT’s manager Pavilion REIT Management Sdn Bhd, after the REIT’s listing on Bursa Malaysia yesterday.

With regard to the REIT’s expansion plan, Ho said the company’s trustees had signed three rights of first refusal (ROFR) for the acquisition of Fahrenheit 88 mall, the extension of Pavilion Kuala Lumpur mall and also another mall in USJ, Subang Jaya.

The management will also evaluate opportunities to acquire assets overseas when presented, but currently the focus is on local expansion, said Ho.

The Pavilion mall in Jalan Bukit Bintang in downtown Kuala Lumpur provides 96.4% of the REIT’s overall revenue.

The REIT opened yesterday at RM1.03, a 13 sen premium to its institutional offer price of 90 sen, with 15.7 million units traded at the market’s opening
bell.

Pavilion REIT executive director Datin Cindy Lim hitting the gong to mark the REIT's debut. From left are executive directors Datuk Maznah Abdul Jalil, Datuk Lee Tuck Fook, Syed Mohd Fareed Shaikh Alhadshi, Ooi Ah Heong, Datuk Roger Tan, Datuk Mokhzani Abdul Wahab and Ho.

The stock ended the day as the most highly traded with 197.3 million units transacted, closing 12 sen higher at RM1.02 after hovering between the low of 98 sen and the high of RM1.04 yesterday.

Based on an estimated gross dividend payout of 5.7 sen next year, the REIT was traded at a yield of 5.6%.


This article appeared in The Edge Financial Daily, December 8, 2011.



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Pavilion REIT seeks expansion

PAVILION Real Estate Investment Trust (Pavilion REIT), the largest retail REIT in Malaysia, is eyeing more local assets to spur growth.


Pavilion REIT Management Sdn Bhd chief executive officer Philip Ho said the trust is seeking opportunities to expand its assets in Penang, Johor and the Klang Valley.

Ho said Pavillion REIT will evaluate any financially viable investment opportunity that comes around.

"As a retail real estate investment trust, our duty is to acquire malls and build up the portfolio," he told reporters after its listing ceremony here.

Ho said the company's trustees had signed three rights of first refusal (ROFR) to acquire Farenheit88, the Pavilion Mall's extension, and a mall in USJ Subang Jaya.

With an appraised value of RM3.54 billion, Pavilion REIT is currently made up of two assets - Pavilion Mall and Pavilion Tower.

The mall, which contributes 96.4 per cent to the appraised value, has 1.3 million sq ft of net lettable area.

It boasts of about 450 retail tenants, making it the largest premium retail fashion mall in Malaysia.

Pavilion REIT yesterday fetched a 13.3 per cent premium over its offer price on its debut on Bursa Malaysia.

It opened at RM1.03, 13 sen higher than its institutional price of 90 sen, with 15.7 million unit shares traded.

Ho said the listing provides the company with direct access to capital markets, thereby strengthening its financial capacity to seize new opportunities in the country.

"We are committed to enhance unitholders' return and value, both through the organic growth of our existing portfolio as well as visible growth via acquisitions," he added.



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Market Commentary

The FBM KLCI index gained 2.07 points or 0.14% on Wednesday. The Finance Index increased 0.38% to 13233.15 points, the Properties Index up 0.64% to 957.73 points and the Plantation Index rose 0.44% to 7882.82 points. The market traded within a range of 9.31 points between an intra-day high of 1482.99 and a low of 1473.68 during the session.

Actively traded stocks include PAVREIT, WIJAYA-WA, SANICHI, LFECORP, RA, UTOPIA-WA, PROTON-CG, COMPUGT, MACRO-WA and UTOPIA. Trading volume decreased to 2088.21 mil shares worth RM1770.42 mil as compared to Tuesday’s 2261.26 mil shares worth RM1304.55 mil.

Leading Movers were AXIATA (+14 sen to RM5.09), CIMB (+11 sen to RM7.20), MAYBANK (+10 sen to RM8.30), GAM (+15 sen to RM3.40) and KLK (+48 sen to RM22.16). Lagging Movers were TENAGA (-19 sen to RM5.46), IOICORP (-6 sen to RM5.12), PETCHEM (-8 sen to RM6.08), DIGI (-4 sen to RM3.62) and PBBANK (-6 sen to RM12.66). Market breadth was positive with 445 gainers as compared to 304 losers. -- JF Apex Securities Bhd



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KLCI reverses earlier losses to close higher

KUALA LUMPUR (Dec 7): The FBM KLCI reversed its earlier losses and closed higher on Wednesday, in line with the improving but still cautious sentiment at key regional markets.

The FBM KLCI rose 2.07 points to close at 1,482.99.

Gainers led losers by 445 to 304 while 306 counters traded unchanged. Volume was 2.09 billion shares valued at RM1.77 billion.

Growing optimism that euro zone leaders are on track to produce a confidence-boosting package of measures to solve the debt crisis at their weekend summit lifted risk appetite on Wednesday, with the euro and global equity markets posting gains, according to Reuters.

At the regional markets, Japan’s Nikkei 225 rose 1.71% to 8,722.17, Hong Kong’s Hang Seng Index up 1.58% to 19,240.58, Taiwan’s Taiex added 1.10% to 7,033.00, South Korea’s Kospi rose 0.87% to 1,919.42, the Shanghai Composite gained 0.29% to 2,332.73 and Singapore’s Straits Times Index rose 1.21% to 2,782.55.

On Bursa Malaysia, KLK was the top gainer and added 48 sen to RM22.16; Nestle rose 40 sen to RM53.60, JT International and KrisAssets were up 30 sen each to RM6.80 and RM5.38, Allianz 21 sen to RM4.88, Aeon 20 sen to RM7.40, Boxpak 18 sen to RM1.69 while Chin Teck, Dutch Lady and BHIC rose 16 sen each to RM8.56, RM22.26 and RM2.86 respectively.

Pavilion REIT, which made its debut on the Main Market of Bursa Malaysia, was the most actively traded counter with 197.3 million units done. The counter added 12 sen to RM1.02.

Other actives included Sanichi, LFE Corp, Utopia’s securities and Proton.

Among the decliners, Proton fell 27 sen to RM4.04, MAHB 24 sen to RM5.80, Tenaga 19 sen to RM5.46, UMW and RHB Capital 13 sen each to RM6.54 and RM7.13, Tradewinds PLANTATION []s 11 sen to RM4.40 while Tasek and LPI Capital fell 10 sen each to RM7.70 and RM13.



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KL shares lower at mid-afternoon

The FTSE Bursa Malaysia KLCI (FBM KLCI) continued to decline at midafternoon today against a mixed backdrop, with selected bluechips weighing in on the market due to the soft sentiment, dealers said.

As at 3pm, the benchmark index dropped 5.34 points to 1,475.58, with losses led by Proton and Malaysia Airports. It had opened 0.33 of a point lower at 1,480.59.

However, global stocks rose on hopes that European leaders would agree to beef up the region's financial rescue ahead of the European Union Summit later this week, the dealers said.

The Finance Index lost 55.03 points to 13,128.47 and the Industrial Index declined 6.6 points to 2,673.42, while the Plantation Index increased 12.98 points to 7,861.04.

The FBM Emas eased 30.13 points to 10,092.96, the FBM 70 Index dropped 34.351 points to 10,964.51 and the FBM Ace Index was 13.56 points higher at 4,238.11.

Gainers led losers 347 to 297 while 286 counters were unchanged with a total volume of 1.343 billion shares worth RM824.530 million traded.

Among active stocks, Pavilion Real Estate gained 10 sen to RM1, Sanichi earned 3.5 sen to 20.5 sen, Wijaya Baru-WA went up five sen to 38 sen and LFE Corporation rose 11.5 sen to 24.5 sen.

Of the heavyweights, Maybank eased three sen to RM8.17, Sime Darby dropped one sen to RM8.94, CIMB edged down six sen to RM7.03 and Petronas Chemicals slipped one sen to RM6.07. -- Bernama



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Pavillion REIT eyes expansion in Malaysia

Pavilion Real Estate Investment Trust (Pavilion REIT), Malaysia's largest retail real estate investment, is seeking opportunities to expand its assets in Penang, Johor and the Klang Valley.

Pavilion REIT's manager, Pavilion REIT Management Sdn Bhd chief executive officer, Philip Ho said: "As a retail real estate investment trust, our duty is to acquire malls, to build up the portfolio.

"We will evaluate any financially viable investment opportunity that comes around," he told reporters at a press conference in Kuala Lumpur today.

Speaking on the expansion plans, Ho said the company's trustees had signed three rights of first refusal (ROFR) to acquire Farenheit88, the Pavilion Mall's extension, and also another mall in USJ Subang Jaya.

On overseas expansion, he said the management will evaluate opportunities when presented, but for now, the company is focused on local expansion.

Ho also said the Pavilion Mall contributes 96.4 per cent to the Group's overall revenue.

Meanwhile, on Bursa Malaysia's main market today, Pavilion REIT opened at RM1.03, a 13 sen premium over its institutional price of 90 sen, with 15.7 million unit shares traded at the opening bell. -- Bernama



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Mixed trend continues at FBM KLCI

Share prices on Bursa Malaysia extended the mixed trend to midday today on profit-taking activities in key heavyweights, which weighed on the FTSE Bursa Malaysia (FBM KLCI), dealers.

As at 12.30 pm, the key index slipped 0.19 point to 1,475.84, after opening 0.33 point lower at 1,480.59, led by losses in Proton, Malaysia Airports and UMW Holdings.

Jupiter Securities head of research Pong Teng Siew said the market yielded mildly to profit-taking activities in the morning session following a fund inflow.

"There are some foreign funds moving into the country and with the limited upside, there's a temptation to take profit," he told Bernama.

Pong said although the global market edged up against prospects that the European Union summit on Friday would produce a workable agreement to contain the eurozone debt crisis, the local bourse remained on a cautious mode.

"The developments in the eurozone is foreseen to be on the mixed side today and on an uptrend in the US. "The local market is thus, torn between the leads, provided by the two developed markets," he added.

The Finance Index lost 57.33 points to 13,126.17, the Plantation Index increased 2.48 points to 7,850.54 while the Industrial Index eased 6.57 points to 2,673.45. The FBM Emas Index shed 31.68 points to 10,091.41, the FBM Mid 70 Index slipped 43.771 points to 10,955.09 and the FBM ACE Index added 20.09 points to 4,244.64.

Gainers outnumbered losers 319 to 278 while 271 counters were unchanged, 618 untraded and 24 others suspended. Turnover stood at 1.167 billion shares worth RM660.640 million.

Pavilion Real Estate Investment Trust, which made its debut on the Main Market today, was the most active stock, gaining 10 sen to RM1. It had opened at a 13 sen premium of RM1.03.

Among other actives, R&A Telecommunication gained two sen to 14 sen, Sanichi perked four sen to 21 sen and 1 Utopia-WA was unchanged at five sen. For the heavyweights, Maybank dropped three sen to RM8.17, Sime Darby slipped one sen to RM8.94, CIMB eased six sen to RM7.03 while Petronas Chemicals was unchanged at RM6.08. -- Bernama



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KLCI extends losses at mid-morning, new listing Pavilion most active

KUALA LUMPUR (Dec 7): The FBM KLCI extended its losses at mid-morning on Wednesday as cautious sentiment kept investors on the sidelines.

Regional markets, however, mostly edged up on optimism that Standard & Poor’s threat of mass credit rating downgrades will pressure European leaders to come up with a convincing framework for resolving the euro zone debt crisis at a crucial summit later this week, according to Reuters.

The FBM KLCI fell 3.90 points to 1,477.02, weighed by losses at select blue chips.

Gainers edged losers by 184 to 163, while 231 counters traded unchanged. Volume was 545.44 million shares valued at RM268.58 million.

At the regional markets, Japan’s Nikkei rose 0.70% to 8,634.93, Hong Kong’s Hang Seng Index gained 0.84% to 19,101.11, the Shanghai Composite Index was up 0.22% to 2,330.94, Taiwan’s Taiex rose 1.11% to 7,033.64, South Korea’s Kospi up 0.80% to 1,918.09 while Singapore’s Straits Times Index was 0.54% higher at 2,764.19.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients on Dec 7 said the FBM KLCI’s resistance areas of 1,480 and 1,503 may cap market gains, whilst the obvious support areas may be located at 1,458 and 1,477.

“Despite the US markets’ firm tone last night, we might not see a good day for the local index further gap filling takes place today,” he said.

Meanwhile, ECM Libra Investment Research in a strategy note on Dec 7 said it expects the FBM KLCI to trade in a range of 1,520 and 1,300 in 1H2012 before moving up towards 1,600 in 2H2012.

It said Malaysia had outperformed in 2011 and was not cheap relative to other markets.

“Hence, for better potential upside, we would be buying individual stocks that have underperformed the FBMKLCI due to negative news or developments, but could see a turnaround in their situation.

“We have identified Tenaga Nasional and Lion Industries,” it said.

Among the decliners on Bursa Malaysia, MAHB fell 21 sen to RM5.83, Proton down 18 sen to RM4.13, UMW 13 sen to RM6.54, Hong Leong Bank 12 sen to RM10.72, Lafarge Malayan Cement 11 sen to RM6.61, Tasek and Baneng fell 10 sen each to RM7.70 and 3 sen, while IJM Corp and Axis REIT fell six sen each to RM2.65 and RM2.55.

Pavilion REIT, which made its debut on the Main Market of Bursa Malaysia, was the most actively traded counter at mid-morning with 88.65 million units done. The counter added 8.5 sen to 98.5 sen.

Other actives included Sanichi, LFE Corp, MLabs, Wijaya warrants and Compugates.

Gainers at mid-morning included Nestle, Aeon, Orient, QSR, Dutch Lady, BHIC, Perstima and Genting.



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KL shares mixed in early trade

Share prices on Bursa Malaysia were somewhat mixed in the early trading today as investors remained cautiously optimistic ahead of the European Union Summit later this week.

Twenty-two minutes after the opening, the FTSE Bursa Malaysia (FBM KLCI) lost 0.86 points to 1,480.06, with losses mostly seen in Proton. Earlier, the benchmark index opened 0.33 points lower at 1,480.59.

The Finance Index dwindled 30.99 points to 13,152.51, the Plantation Index eased 10.25 points to 7,837.81 and the Industrial Index slipped 1.23 points to 2,678.79. The FBM Emas Index slid 2.399 points to 10,120.69, the FBM Mid 70 Index was 0.16 points lower at 10,998.7 but the FBM ACE Index gained 49.84 points to 4,274.39.

Advancers led decliners 149 to 78 while 153 counters were unchanged, 1,106 untraded and 24 others were suspended. Turnover stood at 261.173 million shares worth RM145.514 million.

HWANGDBS Vickers Research said it expects investors on the local bourse to stay on the sidelines following the dearth of newsflow. The key benchmark index may continue to trade within a tight range, likely on a slight downward bias and trend closer to its immediate 1,475 support level, it said in a research note today.

Actives, Pavilion Real Estate added 10 sen to RM1, R&A Telecommunications earned 2.5 sen to 14.5 sen and LFE Corporation gained 13.5 sen to 20.5 sen.

For heavyweights, Maybank, Sime Darby and Petronas Chemicals, were unchanged at RM8.20, RM8.95 and RM6.08, respectively, while CIMB shed 4.0 sen to RM7.05. -- Bernama



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Pavilion REIT active, up on debut

KUALA LUMPUR (Dec 7): Pavilion Real Estate Investment Trust, which made its debut on the Main Market of Bursa Malaysia on Wednesday, was the most active in early trade.

At 9.25am, Pavilion REIT was up 10 sen to RM1 with 70.1 million units done.

Pavilion REIT’s most valuable asset is Pavilion KL Mall (with 1.3 million sq ft of net lettable area (NLA)), which is valued at RM3.4 billion.

The REIT also manages Pavilion Tower – a 20-storey office tower with 167,400 sq ft of NLA valued at RM128.0 million.

Pavilion KL Mall has a diversified tenant base, ranging from supermarkets/department stores (Parkson, Mercato) to high-end fashion outlets (Prada, Gucci, Michael Kors) only available in 1-2 malls in Malaysia.



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Pavilion REIT jumps in KL listing debut

Pavilion Real Estate Investment Trust, a Malaysian property trust, rose 13.3 percent in its Kuala Lumpur stock market debut after raising RM710 million in its initial share offering.

The stock rose to RM1.02 at 9:09 a.m. local time from a reference price of 90 sen. -- Bloomberg



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Pavilion REIT to raise RM710m from IPO

KUALA LUMPUR: Pavilion real estate investment trust (Pavilion REIT) is set to raise RM710.3 million from the sale of 26.33% of its total issued units at its initial public offering (IPO), with prices fixed at 90 sen apiece for institutions and at 88 sen for retail investors yesterday.

Cornerstone investors will also be paying 90 sen apiece, CIMB Investment Bank said in a statement to Bursa Malaysia, issued on the company’s behalf yesterday. Yield for Pavilion REIT, slated to debut on Dec 7, is forecast at 6.41% for FY11 and 6.51% for FY12, based on the retail price of 88 sen.

The listing is Malaysia’s fourth biggest this year, trailing Bumi Armada Bhd, UOA Development Bhd and MSM Malaysia Bhd.

Only 35 million or 4.43% of the 790 million units sold at IPO had been set aside for retail investors, including four million units for eligible employees and tenants.

“Total demand in the institutional book (excluding allocation for cornerstone investors) was approximately 28 times the number of units made available for subscription. The retail offering was also very well-received, with subscription rate for the public ballot portion of approximately 7.5 times,” said the manager Pavilion REIT Management Sdn Bhd in a statement yesterday.

Six cornerstone investors, including the Employees Provident Fund Board and Kumpulan Wang Persaraan, are taking up 265 million shares or 8.83% of the enlarged base. The other cornerstone investors are Great Eastern Life, American International Assurance Bhd, Permodalan Nasional Bhd and HwangDBS Investment Management Bhd. Other local and foreign institutions were allocated 490 million units, subject to book-building, according to its IPO prospectus.

Malton Bhd’s chairman Datuk Lim Siew Choon and his spouse, Datin Cindy Tan Kewi Yong, will collectively own 37.6% of Pavilion REIT post-listing, while Qatar Investment Authority will hold 36.1%.

Pavilion REIT — whose portfolio consists of the Pavilion Kuala Lumpur Mall and the 20-storey Pavilion Tower office block — plans to pay out at least 90% of its distributable income on a half-yearly basis from FY12. It will distribute 100% of its income from the period from its debut to Dec 31, 2012, its IPO prospectus read.

CIMB Investment Bank, Maybank Investment Bank Bhd, Credit Suisse Group and Deutsche Bank Bhd are joint bookrunners for the IPO, while QNB Capital is listed among global managers for the flotation.


This article appeared in The Edge Financial Daily, November 24, 2011.



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