Johore Tin Berhad- Better Than Expected 2Q

Date: 27/08/2020

Source  :  PUBLIC BANK
Stock  :  JOHOTIN       Price Target  :  1.82      |      Price Call  :  BUY
        Last Price  :  1.95      |      Upside/Downside  :  -0.13 (6.67%)

IGB Berhad’s (IGB) 2QFY20 swung into a net loss of RM15m which was below our expectations due to higher-than-expected losses from its retail and hotel businesses. The Group’s bread and butter businesses were negatively impacted by imposition of the Movement Control Order (MCO) by the Malaysian government from 18 March 2020, now under the Recovery MCO phase till 31 August 2020. In 1H20, Group net profit of RM2.7m (- 96.7% YoY) only constituted ~2% of our full year estimates. As such, we cut our FY20/FY21/FY22 earnings by 18%/12%/1% after imputing higher losses from the hotel division and lower retail rental income. We maintain our Outperform call with TP of RM3.45 however, pegged at c.65% discount to our RNAV estimates. Key catalyst near term is the proposed listing of its commercial assets and also potential sale of non-core assets.

  • Group revenue dropped by 47% YoY in 2QFY20 due to weaker contribution from all divisions. RM7.9m in pre-tax loss was registered during the quarter. For its retail division, IGB REIT reported total gross revenue and net property income of RM62.0m and RM37.4m, a decrease of about 54% and 62% respectively YoY. The Mall, Mid Valley Southkey, Johor Bahru contributed revenue of RM42.7m but recorded pre-tax loss of RM26.2m. Meanwhile, the office assets contributed gross revenue and pre-tax profit of RM40.8m and RM18.1m, a decrease of about 2% and an increase of about 8% respectively. Despite the challenging economic conditions, average occupancy rates for the Group’s commercial buildings in 2Q2020 managed to remain at about 80% with average rental rates at RM6.00psf, comparable to the previous year
  • Listing of its commercial assets. To recap, IGB had previously proposed the listing of ”IGB Commercial REIT”, mainly comprising the 9 buildings mostly located within Mid Valley CIty. The Group has also proposed a restricted offer for sale and distribution-in-specie. We reckon the value of the commercial assets is estimated to be in excess of RM3bn. Assuming IGB is keeping a 51% stake, the listing could monetize at least RM1.5bn for shareholders. Despite the pandemic induced slowdown, Management has said it will go ahead with the REIT listing this year

Source: PublicInvest Research - 27 Aug 2020

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Chart Stock Name Last Change Volume 
JOHOTIN 1.95 -0.04 (2.01%) 1,330,300 

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