Upgrade to BUY
4Q21 core net profit and final gross DPU of 2.58sen (FY21: 4.41sen) were above our expectations. YoY growth for 4Q21 was largely driven by sustained performances of Pavilion KL, Elite Pavilion Mall and Intermark Mall but partly dragged by Da Men Mall and office tower. We tweak our FY22/23E estimates by <1%. We U/G PavREIT to a BUY with an upside of 17% to our unchanged DDM-TP of MYR1.40 (Ke: 7.9%).
Strong NPI margin in 4Q21
Excluding revaluation loss of MYR0.6m, 4Q21 core net profit was MYR54.2m (+35% YoY, +171% QoQ), lifting FY21 core earnings to MYR125.9m (+8% YoY), accounting for 120%/108% of our/consensus’ full year estimates. The discrepancies were mainly due to lower-than expected rental rebates and finance cost. Topline in 4Q21 declined 5% YoY to MYR124.3m due to lower occupancy rates at all its assets except Elite Pavilion Mall. This, however, was mitigated by lower operating expenses, namely rental rebates and utilities cost. Overall, NPI margin for 4Q21 was at its all-time high since the pandemic at 66.5%, bringing its FY21’s NPI to MYR236.6m (+1.3%).
Marginal forecast changes
We tweak our FY22/23E net profit forecasts by <1% post full-year FY21 results adjustments and maintain our key assumptions across PavREIT assets. We also introduce our FY24 forecasts.
Outlook for FY22
Management is upbeat on its FY22’s outlook, with positive rental reversion of between 3%-5%. We note that 55% of NLA (~1.28m sq.ft.) are due for renewal in 2022, these being mainly its anchor tenants. Meanwhile, the decision to acquire Pavilion Bukit Jalil is only expected to be known in the next 9-12months. However, we have yet to impute new assets into our forecasts, pending the confirmation. PavREIT’s end-FY21 gross gearing was a decent 0.35x.