IGB REIT -
Share price: MYR1.22
Target price: MYR1.36 (from MYR1.41)
An Organic Growth Story
Maintain HOLD. IGBR’s 9M13 core net profit of MYR153.9m was in line at 74% of our full-year forecast and 73% of consensus. Short-term earnings will be driven by organic growth of its existing retail assets – Mid Valley Megamall (MVM) and The Gardens Mall (TGM). There is no change to our FY13-15 earnings forecasts but we shave our TP to MYR1.36 (-3.5%) after factoring in a higher beta of 0.71 (industry average; from 0.6) in view of a more volatile bond market.
Results tracking expectations. 3Q13 core net profit of MYR53.8m (+6.1% QoQ) made up 26% of our full-year estimate. The results were however slightly ahead (by 6%) of management’s IPO full-year net profit forecast of MYR196.1m. The sequential growth in 3Q13 core net profit was mainly due to a better NPI margin (+2.3ppt) thanks to lower property costs. No YoY comparisons are available as the trust only completed the acquisitions of MVM and TGM on 20 Sep 2012.
An organic growth story. Short-term growth in earnings will be driven by existing assets, MVM and GM. We believe that an asset injection from its sponsor, IGB Corp, may occur, but only after 2018. IGB Corp’s Southkey mall in Johor Bahru (1.8m NLA; part of the mixed development comprising service apartments, office and hotel) is slated for completion in 2016 whilst another mall in Medini (under the 18 Medini project) will only be ready post-2017, we understand.
No change to forecasts. We expect FY13 EPU growth of 9%, supported by positive rental revisions (+5% for MVM; +15% for GM) and a 5% YoY increase in rental turnover. Leases due for renewal in FY13 (mostly in 3Q13) account for 39% of IGBR’s current gross rental income (31% from MVM; 57.5% from GM, mainly from anchor tenants). IGBR’s debt-to-asset ratio remained healthy at 0.25x as at Sep 2013.
Publish date: 25/10/13