STOCK FOCUS OF THE DAY
Pavilion REIT: Subdued rental reversion growth HOLD
We maintain our HOLD call on Pavilion REIT with a lower fair value of RM1.53 from RM1.87 based on a forward target yield of 5.5% vs. 4.7% previously. The downward FV revision is in line with the rising interest rate environment, matching investors’ demand for higher yields. We have revised our earnings forecast downwards by 3% and 5% for FY18F-19F based on the expectation of minimal growth on rental reversions from various properties and taking into account that the injection of Pavilion Elite is reflected only after 1HFY18.
We expect Pavilion Kuala Lumpur as well as Intermark Mall to continue maintaining high occupancy rates at 99% and 90% respectively with marginal growth on rental reversions and minimal leases expiring in FY18 (14% and 20% respectively). Likewise, Pavilion Tower which has 37% of leases expiring in 2018, is expected to retain all tenants, maintaining close to full occupancy. The successful tenant reversion at Pavilion Tower may however be at the expense of positive rental reversions as maintaining high occupancy remains the priority.
RETAIL RESEARCH
Stocks On Radar: Wah Seong, QL Resources, Eonmetall, Willowglen MSC
ECONOMIC HIGHLIGHT
China: No signs of moderating growth
NEWS HIGHLIGHTS
MAHB: Not building KLIA3 but will expand KLIA Main Terminal
Vsolar: Expects revenue boost from biogas energy plant
IPO: GDB Holdings’ IPO public tranche oversubscribed 43 times
Oil & Gas Sector: Petronas inks deal to supply LNG for up to 13 years
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