Pavilion REIT’s 3Q NPI jumps 90% on higher revenue, lower property operating expenses

• Quarterly revenue grew 26.7% to RM143.62 million compared with RM113.32 million, mainly contributed by higher revenue rent and income from advertising and marketing events, given that all economic sectors and businesses were allowed to reopen.

KUALA LUMPUR (Oct 27): Pavilion Real Estate Investment Trust, which is still in the midst of discussion to buy Pavilion Bukit Jalil mall from Malton Bhd, posted a higher net property income (NPI) of RM90.22 million in the third quarter ended Sept 30, 2022 (3QFY22).

This is 90% higher than the RM47.47 million NPI recorded in 3QFY21, thanks to increased revenue as well as lower property operating expenses.

Earnings per share rose to 2 sen from 0.65 sen a year earlier, the trust’s filing with Bursa Malaysia revealed on Thursday (Oct 27).

Quarterly revenue grew 26.7% to RM143.62 million compared with RM113.32 million, mainly contributed by higher revenue rent and income from advertising and marketing events, given that all economic sectors and businesses were allowed to reopen.

According to Pavilion REIT, total property operating expenses decreased to RM53.405 million from RM65.85 million as no pandemic rebates were given to tenants during the quarter under review.

This, however, was offset by higher utility cost as the 10% electricity rebate given by the government ended in December 2021. Moreover, there was an imposition of electricity tariff surcharge of 3.7 sen per kilowatt hour (kWh) to the non-domestic sector from Feb 1 this year.

“Increase in maintenance cost was mainly due to remobilizing ad-hoc upkeeps, installation of rain harvesting and air handling condensate water recycling systems and adjustment to contract sum of labour-intensive services due to the minimum wage requirements.

“Marketing expenses also increased due to the resumption of marketing activities and events with the reopening of the economy,” it said.

The REIT said distributable income in 3QFY22 was RM63.5 million or 2.08 sen per unit. This consists of income after tax of RM61.2 million and non-cash adjustments for depreciation of RM100,000, amortisation of borrowing transaction cost of RM400,000 and 25% of manager’s management fee payable in units amounting to RM1.8 million.

For the nine-month period ended Sept 30 (9MFY22), Pavilion REIT’s NPI jumped 73.7% to RM267.315 million from RM153.93 million, while revenue rose 16.3% to RM423.89 million from RM364.315 million.

“Although the manager is confident that the growth momentum of the retail sector is expected to remain strong, purchasing power of consumers have been affected by inflation and other economic factors and there may be some scale back on discretionary spending.

“With year-end around the corner, Pavilion REIT malls are all gearing up for the World Cup and its annual celebrations. The manager will continue to enhance its properties occupancy and tenant mix through proactive lease management and manage its operating cost,” Pavilion REIT commented on its prospects.

Listed in December 2011, with the largest exposure to the retail sector by any listed Malaysian REIT, Pavilion REIT owns a RM5.9 billion portfolio based on appraised value, to which its most prominent asset is the Pavilion Kuala Lumpur Mall in Bukit Bintang, Kuala Lumpur.

Shares of Pavilion REIT closed up 0.81% or one sen to RM1.25 on Thursday, translating into a market capitalisation of RM3.82 billion. It is currently trading at a historical price-to-earnings ratio of 19.68 times.