Pavilion-REIT forecast to continue solid showing

PETALING JAYA: Analysts expect stronger earnings for Pavilion Real Estate Investment Trust’s (Pavilion-REIT) in the second half of this year (2H25) as the group’s growth continues to gain momentum.

The group reported its second quarter of financial year 2025 (2Q25) core net profit of RM78.7mil earlier this week, down 13% quarter-on-quarter and up 17.2% year-on-year, bringing 1H25’s total to RM169.1mil, which was in line with most consensus expectations.

Hong Leong Investment Bank Research (HLIB Research) said in a report the outlook for Pavilion-REIT for financial year 2025 (FY25) remains positive, underpinned by sustained tourism-driven footfall at key malls such as Pavilion Kuala Lumpur and Pavilion Elite, which contributed about 67% of 1H25 revenue.

“This, along with management’s low to mid-single-digit rental revision guidance, supports our view of a resilient FY25 performance,” it added.

HLIB Research noted that Pavilion-REIT’s management had observed a notable increase in tourist footfall at Pavilion KL and Pavilion Elite over the past two to three weeks.

“This aligns with our 2H25 outlook, where we expect sustained high footfall at these prime malls supported by Visit Malaysia 2026 initiatives and the mutual visa exemption between Malaysia and China,” the research house said.

HLIB Research, which maintained a “buy” call on the stock with an unchanged target price of RM1.77, said it remains positive on the REIT, underpinned by a favourable tourism outlook, which is expected to boost footfall and spending in key assets like Pavilion KL and Pavilion Elite, reinforcing its growth momentum.

CGS International Research (CGSI Research) said it continues to see Pavilion-REIT as a proxy for growing private consumption, an uptick in tourism and accelerated earnings expansion from Pavilion Bukit Jalil (PBJ).

The research house said the group is expected to post higher 2H25 earnings backed improving occupancy and earnings from PBJ, incremental contributions from the newly acquired Banyan Tree Kuala Lumpur hotel and Pavilion Hotel Kuala Lumpur as well interest savings following the overnight policy rate cut on July 9.

On key takeaways from Pavilion-REIT’s 2Q25 briefing earlier this week, CGSI Research said management highlighted that PBJ’s valuation has been maintained at RM2.2bil following a recent revaluation exercise by consultants Knight Frank and KPMG.

Therefore, the outstanding acquisition consideration remains unchanged at RM400mil (with RM1.8bil already paid), which is due next month.

“We believe this could lead to a modest increase in gearing, as it draws down additional debt to fund the remaining consideration,” the research house said.

CGSI Research reiterated an “add” call on the REIT with a target price of RM1.79 per share.

RHB Research, meanwhile, kept a “buy” call with a new target price of RM2 per share. It said Pavilion-REIT’s 1H25 results were in line with expectations and supported by the solid performance of PBJ.

According to the research house, Pavilion REIT’s stands to benefit from its robust asset quality, the recovery in tourism, and exposure to floating-rate debt (88%), which makes it a beneficiary of recent interest rate cuts.

On the REIT’s outlook, RHB Research said it expects 3Q25 retail sales to remain soft, due to the absence of festival-related spending, before picking up in the seasonally stronger 4Q25.