STOCK FOCUS OF THE DAY
Pavilion REIT : 1Q within
expectation HOLD
We reaffirm our HOLD recommendation on Pavilion REIT (PREIT)
with an unchanged fair value of RM1.40/unit, based on a DCF valuation. PREIT
reported core earnings of RM60mil (+7% YoY and +6% QoQ) for 1QFY15 and DPU of
1.53sen, vs. 1.46sen in 4QFY14. Results were within expectations – making up
24% of our full-year estimates of RM240mil and 25% of consensus.
Its solid revenue growth of 4% YoY is attributed to:- (i)
positive contribution from FY14’s asset enhancement initiatives – i.e. Beauty
Precinct, additional NLA at the “Couture Pavilion” at Level 2 and Level 7; and
(ii) higher service charge (+17%) effective 1 May 2014.
Net property income was 6% higher YoY due to higher
provision of assessment for 1QFY14, offset by ongoing preventive maintenance
works carried during the quarter and higher utilities. We make no changes to
our EPS estimates. PREIT is expected to continue growing organically,
underpinned by healthy rental reversion. FY15F earnings are expected to come in
at RM251mil.
Nevertheless, we see an exciting 2016 in relation to its
acquisition plans. We expect increased newsflow momentum given that da:men mall
is due for completion in 4QCY15. Notwithstanding this, the Pavilion Extension
is also earmarked for completion by mid-2016. As for the underground tunnel
which is connected to Pavilion Extension, PREIT has the right to use (but not
acquire) the former. At the current level, valuation is fair. It is trading at
a distribution yield of 5.3% and a yield spread of 138bps against the 10-year
Malaysia Government Bond’s 3.9%.
QUICK TAKES
Press Metal : China ends 15% export tax on aluminium
products
HOLD
Automobile Sector : Competition heats up in the
C-segment NEUTRAL
NEWS HIGHLIGHTS
Mah Sing Group : Mah Sing’s hungry
SapuraKencana Petroleum : SapKen seeks to be reinstated in
syariah-compliant list
Eco World Development Group : Aims to list its SPAC in the
third quarter
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