IGB Real Estate Investment Trusts’ (IGBREIT) 4QFY21 realised net profit came in within our and consensus estimates at RM73.6m (+2.1% YoY, +91.0% QoQ). While gross revenue dropped 19.1% YoY (with gross rental income also down by 14.4%), realised net profit was higher by 2.1% YoY mainly due to lower reimbursement costs registered during the quarter. To recap, reimbursement costs surged by 35.9% YoY in FY20 due to higher allowance for impairment of trade receivables from tenants who faced operational challenges in settling their rental payments. In FY21, Group realised net profit of RM200.1m (-15.5% YoY) constituted ~103% and ~95% of our and consensus full year estimates. Maintain Neutral call and RM1.72 TP as we remain wary over the risk of new waves that could derail recovery.

• FY21 revenue dropped 14.1% YoY to RM399.5m with a corresponding 13.1% YoY drop in net property income to RM275.1m mainly due to the higher rental support provided to tenants in FY21 arising from the Covid-19 pandemic, resultant MCOs and/or NRP. The distributable income for FY21 amounted to RM220.6m, consisting of realised profit of RM200.1m and the non-cash adjustments arising mainly from manager fee payable in units of RM19.0m.

• QoQ performance. In 4QFY21, IGBREIT’s gross revenue was RM119.4m, improving by 24.6% QoQ with net property income at RM93.7m (+67.5% QoQ). This is mainly due to the lower rental support provided to tenants and reversal for impairment of trade receivables arising from the initial signs for gradual recovery in footfall and vehicle traffic volume, which contributed to improving retail sales of tenants. Relaxation of containment measures and economic reopening helped. As for the Group’s assets, we understand that the market value of Mid Valley Megamall and The Gardens Mall as at 31 December 2021 remained at RM3.665bn and RM1.295bn respectively, unchanged from the previous quarter. Separately, the medium-term notes (MTN) issued in 2017 which has an expected maturity date of 20 September 2022 and a fixed interest payment of 4.43% per annum will likely be refinanced prior to maturity in the coming quarters.

Source: PublicInvest Research - 27 Jan 2022