PETALING JAYA: Affin Hwang Capital Research has slashed its 2020-21 earnings forecast for Pavilion REIT (PREIT), following its weaker-than-expected earnings for FY19 ended Dec 31, according to a recent note by the research house.
For the fourth quarter ended Dec 31, PREIT’s 4Q19 realised net profit dropped 10.4% yoy to RM59.7 million from RM66.7 million in Q4’18.
Revenue slipped by 0.7% yoy to RM146 million from RM147.1 million as operating costs remained evaluated due to costs incurred for tenancy lots enhancement at Pavilion KL, market expenses incurred for Deepavali and Christmas and upgrading of advertising media.
PREIT’s 2019 realised net profit fell by 2.9% year on year (yoy) to RM248 million due to lower earnings from Da Men, Intermark and Pavilion Tower, mitigated by higher contribution from Pavilion KL and Elite Pavilion Mall.
In tandem, 2019’s distribution per unit slipped by 3.1% to 8.5 sen.
Subsequently, Affin Hwang cut its 2020-21 earnings forecast by 6% and lowered its target price to RM1.75, from RM1.85. It is maintaining its “hold” call on the stock.
For 2020, PREIT said management is cautious on the overall business outlook.
“Notwithstanding a higher traffic flow at Pavilion KL, management observed that consumer confidence has weakened and expects a flattish year for Pavilion KL,” said Affin Hwang in its note.
However, it pointed out that the occupancy at the Da Men mall has improved but the rental has fallen by circa 15% yoy, and that PREIT’s management is hopeful that the opening of cinema scheduled in October will lift the mall’s vibrancy and 2021 rental growth.
