Pavilion REIT is one of Malaysia largest retail concentrated REIT with 5 properties across Malaysia as at 31 December 2021. Being a retail concentrated REIT, they have been adversely impacted by the COVID-19 pandemic. In this post, we will look at Pavilion REIT FY21 performance to see how it has performed.
Read More:
- 5 Key Things You Need To Know Of PAVREIT 2019 Performance
- 5 Key things to know of Pavilion REIT FY20 Performance
1. Occupancy rate of Pavilion REIT portfolio continues to decline
| Occupancy rate | FY19 | FY20 | FY21 |
| Pavilion Mall | 98% | 97% | 90% |
| Pavilion Tower | 86% | 86% | 79% |
| Da Men Mall | 72% | 69% | 62% |
| Intermark Mall | 97% | 86% | 84% |
| Elite Pavilion Mall | 95% | 83% | 86% |
Occupancy rate is an important key driver of any REIT performance. Looking at Pavilion REIT occupancy rate, 4 out of 5 of its properties reported a decline in occupancy rate in 31 December 2021. Pavilion Kuala Lumpur Mall’s occupancy rate decrease from 97% in FY20 to 90% in FY21. Likewise, Intermark Mall’s occupancy dropped from 86% in FY20 to 84% in FY21 as tenants struggle to sustained outlet as a result of MCO and SOP implemented.
Da Men mall which was already struggling in the past continues to decline down to 62% in FY21. Pavilion Tower likewise declined with a soften outlook of the office market whereby employers begun downsizing due to hybrid working style.
The only mall which reported a positive improvement is Elite Pavilion mall of which occupancy rate improved from 83% in FY20 to 86% in FY21.
2. Continuous decline in overall financial performance
| MYR in 000s | FY19 | FY20 | FY21 |
| Revenue | 585,353 | 510,220 | 488,591 |
| Net Property Income | 375,184 | 233,524 | 236,622 |
With the overall decline in occupancy rate, it comes to no surprise that financial performance has decreased. Revenue has declined from MYR 510.2 million in FY20 to MYR 488.6 million in FY21. The decrease is mainly due to loss of income from lower occupancy because of non renewal of some expired tenancies.
3. Distribution per unit of 4.4 cents with 3.35% yield
| MYR in cents | FY19 | FY20 | FY21 |
| Distribution Per Unit ( DPU) | 8.5 | 4.1 | 4.4 |
As for the distribution to investors, distribution per unit improved slightly from 4.1 cents in FY20 to 4.4 cents in FY21. The slight improvement is due to a lower property operating expenses resulting in an overall improvement in distributable income. Based on latest closing traded price, this will give investors yield of 3.35%.
4. Healthy gearing level below permissible limit
| % | FY19 | FY20 | FY21 |
| Gearing | 33.9% | 34.7% | 34.8% |
As at 31 December 2021, Pavilion REIT has total borrowings of MYR 2.2 billion in borrowings which translates to gearing of 34.8%. This is below the market norm and likewise below the permissible limit giving them ample debt headroom for further asset acquisition and enhancement initiatives.
Of the total debt, approximately 43% of the debts are fixed rate in nature with the remaining 57% subject to interest rate risk. Depending how you view it, this would also allow them to benefit from a low interest environment.
Summary
Being in the office and retail REIT sector, Pavilion REIT continues to be adversely affected by the COVID-19 pandemic with both operational and financial performance reporting year on year decline. From a price to book valuation perspective, Pavilion REIT is currently undervalued trading at price to book of 0.98.
What are your thoughts on Pavilion REIT FY21 Performance? If you are just getting started, feel free to read more of our REIT Guide and REIT Analysis. You can also read more about what REITs are if you are new to REITs.
