KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) has maintained its “Hold” call on Pavilion Real Estate Investment Trust (Pavilion REIT), with an unchanged target price of RM1.85.
It said the REIT’s prospects remain supported by a favourable tourism outlook that is expected to boost footfall and spending at key assets such as Pavilion KL and Pavilion Elite, reinforcing its growth momentum.
However, it noted that the recent share price rally has made its risk-reward profile less compelling.
HLIB Research expects Pavilion REIT to sustain high footfall at Pavilion Kuala Lumpur and Elite Pavilion, which together contributed about 65 per cent of its revenue for the first nine months of 2025 (9M25).
It said the strong performance is likely to continue into the fourth quarter of 2025 (4Q25), a seasonally strong period driven by year-end festive and holiday spending.
“Looking ahead to 2026, we believe Pavilion REIT will benefit from Visit Malaysia 2026 initiatives and the mutual visa exemption between Malaysia and China.
“This positive outlook is further supported by robust tourist arrivals, which rose 8.1 per cent year-on-year (YoY) for January to August, with Chinese tourists up 22.2 per cent,” it said.
HLIB Research added that management’s guidance of low- to mid-single-digit rental reversions, which aligns with its assumptions, should help sustain steady growth.
The firm expects Pavilion REIT to deliver resilient performance for the remainder of FY25 and into FY26.
It said Pavilion Bukit Jalil continues to stand out, with occupancy currently at 90 per cent and on track to reach 95 per cent by year-end, supported by a strong leasing pipeline, particularly from Chinese retailers.
For the third quarter of 2025 (3Q25), Pavilion REIT reported a core net profit of RM94.6 million, up 20.2 per cent quarter-on-quarter (QoQ) and 19.8 per cent YoY.
This brought its 9M25 earnings to RM263.7 million, an increase of 15.0 per cent YoY.
HLIB Research said the results were in line with its expectations but slightly below consensus estimates.
Retail occupancy improved to 94 per cent in 3Q25, up from 87 per cent in 2Q25, mainly due to Da Men Mall being fully taken up compared to 33 per cent previously.
Pavilion Tower’s office occupancy also rose to 82 per cent from 75 per cent in the prior quarter, while gearing increased to 41 per cent from 36 per cent.
© New Straits Times Press (M) Bhd
