IGB Real Estate Investment Trusts’ (IGBREIT) started the year with a weak performance, after realised net profit came in at only RM43.7m (-36.0% YoY, - 39.4% QoQ) which was below our and consensus estimates. The disappointment was primarily due to the higher-than-expected allowance for impairment of receivables recognized during the quarter amounting to RM9.96m (vis-à-vis RM0.66m a year ago) and lower-than-expected revenue due to the second MCO (MCO 2.0) which adversely impacted shopper footfall, lesser car traffic volume and more temporary closure of retail shops. The 1QFY21 net income only constituted c.15% of our and consensus full year estimates. As such, we cut our FY21/FY22 earnings further by -13%/-10% after factoring lower rent revenue and impairments. We are still wary as recovery looks patchy at the moment with interstate travel ban still in place while movement restrictions and social distancing measures could remain till end-21 until vaccination picking up speed. We remain cautious and keep our Neutral call and RM1.72 TP unchanged.

• 1QFY21 revenue dropped 20.5% YoY to RM99.4m, and correspondingly, net property income and pre-tax profit decreased 29.4% and 36.0% respectively to RM62.4m and RM43.7m. The weak performance was attributed to the rental support provided to tenants, lower car park income and higher allowance for impairment of trade receivables arising from the Covid-19 pandemic and resultant MCOs. The distributable income for 1QFY21 amounted to RM48.6m, consisting of realised profit of RM43.7m and the non-cash adjustments arising mainly from manager fee payable in units of RM4.5m.

Source: PublicInvest Research - 27 Apr 2021