Sunday, November 6, 2011

PAVILION REIT IPO-Why I think it can be hold for longterm


I was reading most of the analysts reports regarding Pavilion REIT IPO, also the prospectus.
Most of the analysts wrote the same thing, don't know who copy who.
Basically, if you have did a study yourself, and you are a person who loves shopping, you should have know Pavilion main target is up market, yet it get close to us in middle income group and also youngster nowadays like to go there for shopping, because it has lots of shops hardly find anywhere else in Kuala Lumpur, yes not even in KLCC for some international brands.

Most of the analyst compared it with the KLCC shopping centre Suria. Well, most comments are their rental still low compared to KLCC, room to grow further. And also with newly launch of Japan culture street, and upcoming expansion of shops, the future growth is bright. With coming MRT and also bridge being built, it helps attracts customer from Bukit Bintang area.

PAVILION REIT IPO includes the shopping mall, as well as office tower. In future it might include Fahrenheit 88 and the expanded area.
From information from prospectus:
Pavilion Kuala Lumpur Mall
Net Lettable Area (sq ft) 1,335,119
GFA (sq ft)(excluding car park) 2,202,557
Appraised Value as at 1 June 2011 (1) RM3,415,000,000
Occupancy Rate as at 1 June 2011 (2) 97.7%
Contribution of the Subject Properties by Appraised Value 96.4%

Pavilion Tower
Net Lettable Area (sq ft) 167,407
GFA (sq ft)(excluding car park) 243,288
Appraised Value as at 1 June 2011 (1) RM128,000,000
Occupancy Rate as at 1 June 2011 (2) 41.4%
Contribution of the Subject Properties by Appraised Value 3.6%

One thing most of the shareholders might be missing is the below structure of shareholdings.

Datuk Lim-37.6%, Qatar Holding-36.1%, Other unitholders-26.3%. Seems like the floating can be low as major shareholders already hold 73.7% If you add those big corporation like unit trusts funds, insurance companies and investment banks, not much will be left in the market for liquidity I think.

Anyway, after listing, it will be Malaysia largest retail REIT. PavilionREIT also has a strong book, Based on Pavilion REIT’s Consolidated Pro Forma Statement of Financial Position, Pavilion REIT’s debt to asset ratio upon Listing will be 20.1%. ( as seen on the prospectus)

If you ask me what's the most important factor to look for in REIT, I would say first the management team, then how they handle the money invested into the REIT. For PavilionREIT, look at prospectus what they intend to do with the IPO money.

Use of proceed: Mainly for acquisition 648,000,000 allocated for that

NAV according pg64 will be RM0.94

Look at the previous year's rental income

Using latest 2010 record, Rental income=256,699,000, NPI=202,874,000. Total Liabilities in earlier pg is RM805,216,000. TL/Income=3.96, below 5 still in a very healthy position. Meaning using NPI of 202,874,000 every year, it can pay off all TL within 4 years time.

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