IGB Real Estate Investment Trusts’ (IGBREIT) 1QFY22 realised net profit beat our and consensus estimates, with first quarter profit of RM85.4m (+95.3% YoY, +16.0% QoQ) already at c.29% of our and consensus full year estimates. The performance was lifted primarily by lower rental support provided to tenants in the current quarter arising from the economic reopening and improving retail sales of tenants. Higher net property income and profit after taxation were mainly due to the said lower rental support provided to tenants as well as reversal for impairment of trade receivables in the current quarter. We understand that both assets in the portfolio also saw its average gross monthly rental income recover close to pre Covid levels (ie. 2018) with occupancy virtually at 100%. All told, we adjust our FY22/23/24 by +19%/+11%/+10% respectively to account for higher average rent. We maintain our Neutral call and RM1.72 TP however given narrowing yield spreads (10 year MGS at 4.2% currently, from 3.1% a year ago).

• 1QFY22 revenue rose 34.6% YoY to RM133.8m as net property income correspondingly increased 72.7% YoY to RM107.7m, while profit after taxation was 95.3% YoY higher at RM85.4m. Distributable income for the current quarter amounted to RM91.9m, consisting of realised profit of RM85.4m and the non-cash adjustments arising mainly from Manager fee payable in units of RM6.2m.

• Average rental recovered to pre-Covid levels. We understand that average gross monthly rental income for Mid Valley Megamall is currently at RM15.28psf, which improved 34.5% YoY and is about 3.1% higher than FY18. Meanwhile, The Gardens Mall is currently yielding RM13.10psf (+27.2% YoY) or about the same rate it was getting back in FY2018. Both assets are virtually fully-occupied at 99.7% occupancy. We understand that Mid Valley Megamall has 193 leases up for renewal in FY22 (23.45% of total net lettable area – NLA) while The Gardens Mall has 130 leases expiring in FY22 (45.4% of total NLA).

Source: PublicInvest Research - 28 Apr 2022