Pavilion REIT is definitely riding on KLSE bullish sentiment for this week. For the technical analysis inclined, it just surged past the RM 1.10 resistance on 9 Feb, and subsequently closed all time high at RM 1.18 today. Now RM 1.10 became the short term price support. I didn’t anticipate it to reach another all time in such a short timespan after its previous all-time-high on 29 December 2011. Read about it here in my previous post.
For those who are lucky enough to acquire PAVREIT at its IPO price of RM 0.88, you already have 34 percent paper gain as of today, just 2 months after its IPO.
Naturally, I got curious on the significant price jump, which is quite unusual for REIT in just 2 short days. This is what I dug out from i3investor.com.
A good set of results. PavREIT’s RM12.4m core net profit over 7-31 Dec 2011 (listed on 8 Dec 2011) was 13% above our and its own IPO forecasts. Management is confident of beating its own RM167m 2012 net profit forecast, especially with the reconfiguration of the existing TANGS space into a high street fashion precinct, thereby attracting higher rentals psf. We tweak our 2012-13 net profit forecasts by +1% but maintain our RM1.10 DCF-based TP. We maintain our Hold recommendation, as total return is less than 15%.
-Maybank Research 9 Feb 2012
Here are 3 phrases to summarize the news above:- Outperform, beats earnings forecast and growth in asset value.
Here are the other news you should feel positive about if you are holding PAVREIT.
Asset Enhancement Initiative
The REIT Manager of Pavilion will spend RM13.5 million to transform 68,000 square feet net lettable area (NLA) of the existing TANG’S Fashion lifestyle store space into a high street fashion precinct. This will begin in Q1 2012 and is expected to complete by August 2012.
Read: More rental income, which translates to dividend distribution for investors.
Income distribution from rental yield
Dividend distribution of 0.44 cents per share, on 29 Feb 2012. Not much, but the consistent dividend payout is the main reason I decided to hold this for long. It’s not so much of the capital appreciation, but hey, it is definitely a bonus. My opinion is, stock price which swings up without concrete data to back it up (such as growth prospect, innovative product release or solid financial statements) is as likely to swing down by the same percentage the following day. In other words, it would not be sustainable. For Pavilion REIT, this is not the case.
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Disclaimer: Long position in Pavilion REIT. This is not an invitation to buy or sell. I do not guarantee the accuracy or validity of the information above. Do your own due diligence before investing and invest at your own risk.