For the 4Q14, Pavilion's revenues grew by 4.5% yoy to RM100.8m while net property income increased 4.1% yoy as property operating expenses were 5.2% higher. Core net profit for the quarter grew 3.8% to RM57.1m and, after accounting for non-cash charges of RM2m, distributable income rose 4% yoy. For the full year, revenue grew by 7.1%, driven by rental reversions at its mall. We understand that the number of visitors to the mall was flattish yoy, although the mall's reported sales grew by 5-6%. 2014 was a challenging year for tourist footfall due to the various incidents affecting tourism in the region, such as the disappearance of MH370. 

Pavilion hosted a conference call in conjunction with the release of its 4Q14 results. There were no surprises during the call. The main takeaway from the conference call is that 2015's outlook remains challenging, underpinned by the GST, which will be implemented in April 2015, and a falling RM against US$, which will affect the prices of imported goods. Management still believes it can grow its revenues, albeit by a low single-digit level, as it expects consumer sentiment to dip post GST for 6-9 months. 

We also gather from the conference call that Pavilion will be looking to incur around RM34m in capex for 2015, mainly to increase its mall's power efficiency, including installing more advanced thermostats to better allocate cold air, in light of the higher cost of electricity. As it stands, Pavilion's utilities bill amounts to RM36m-37m p.a. and management intends to reduce this.

Source: CIMB Daybreak - 16 January 2015, Full PDF Report