Pavilion REIT – a post-IPO long position

I did apply for Pavilion REIT IPO before its listing on 7 December via Maybank2u, but was not successful. However, I opened a long position a few days after that, with entry price of RM 1.01.  At the time of this post,  my entry price capital gain is about 3.9 percent at RM 1.05.  Besides  the relatively low volatility and steady dividend distribution of REITs, here are a few reasons why I am invested in.

First, although PAVREIT is categorized as retail REIT, 96 percent of appraised property value consist of the  Pavilion Mall. This makes it a shopping malls REIT with over 95 percent occupancy. That’s one defensive investment.

Pavilion REIT - a post-IPO long position by CF Lieu - Certified Financial Planner Malaysia

Second, its current gearing ratio is about 20 percent of total asset value. In layman terms, it is a measure of total debt; lower, better. Conventionally, for REITs, rule of thumb is around one third of its asset value.

Third, dividend payout will be 100 percent for the first fiscal year ending Dec 2012. 90 percent is the norm.

Fourth, it is backed by some of the market “big guys” – EPF (yes, our beloved retirement fund), Great Eastern Life Assurance, AIA, PNB and HwangDBS.

I know, all boring facts above. Most people would be attracted by marketing-worthy material below.

  1. Second largest in market capitalization behind Sunway REIT
  2. Potential acquisitions of 2 more shopping malls
  3. Forecast yield of 6.51% for FY2012
  4. Kenanga Investment valuation of RM 1.12 per share, which translates to capital appreciation of 28% from its initial IPO price of RM 0.88

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