• We maintain our BUY call on Pavilion Real Estate Investment Trust (PREIT) with an unchanged forecast and fair value (FV) of RM1.50/share based on an FY23F target distribution yield of 5%. No adjustment for ESG based on our 3-star rating.

• In a bourse filling, PREIT announced that MTrustee Bhd (MTrustee), acting as the trustee of the PREIT, has accepted an invitation from Regal Path Sdn Bhd (a subsidiary of Malton Bhd) to commence discussions for the potential acquisition of Pavilion Bukit Jalil Mall.

• Pavilion Bukit Jalil Mall is located at Bukit Jalil City. It has five (5) levels of retail spaces and two (2) levels of basement parking. Based on the company’s website, the mall comprises 1.8mil sq ft of retail space. The mall has officially opened for business on 3 December 2021.

• In 2018, PREIT announced its intention to participate in the ownership of Pavilion Bukit Jalil Mall development. PREIT had then entered into a non-disclosure agreement (NDA) to commence due diligence, discussions on the method of participation, and negotiate relevant terms and conditions. However, in early 2019, PREIT decided not to participate in the ownership of the Pavilion Bukit Jalil mall.

• We maintain our FY21–23F earnings as the discussion is still at the initial stage of an acquisition process.

• Our BUY is premised on the following: (i) PREIT’s quality assets which are strategically located in the heart of the financial capital in Malaysia; (ii) PREIT provides a good platform for new international brands to establish footprints for expansion into Malaysian market, hence supporting demand for retail space at the malls; and (iii) it is a post-pandemic recovery play with attractive return and dividend yields projected above 4% for FY22F amidst a low interest rate environment.

Source: AmInvest Research - 27 Dec 2021