IGB Berhad (IGB) registered a strong 1QFY22 net profit of RM42.7m (>100% YoY, -81.7% QoQ), which exceeded both our and consensus expectations. The 1QFY22 net profit, which already contributed 43% and 44% of our and consensus full year estimates, was mainly lifted by the retail business which netted higher net property income due to lower rental support provided to tenants in the current quarter arising from the economic reopening and improving retail sales of tenants. We revise our FY22/FY23/FY24 estimates higher by 76%/55%/26% after incorporating better retail margins. Maintain our Outperform call with TP of RM2.70, pegged at c.65% discount to our RNAV estimates as we still believe in the long-term attractiveness of its assets.
- Revenue from retail assets (via IGBREIT) rose 34.6% YoY in 1QFY22 to RM133.8m and correspondingly, net property income increased 72.7% YoY to RM107.7m while profit after taxation was 95.3% YoY higher at RM85.4m. 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 FY18. Both assets are virtually fully-occupied at 99.7% occupancy. Separately, The Mall, Mid Valley Southkey, Johor Bahru contributed revenue of RM38.0m (53% YoY) and recorded pre-tax profit of RM6.2m (1QFY21: - RM10.3m) after accounting for depreciation of RM9.4m and finance cost of RM8.9m.
- Property Investment–Commercial division contributed gross revenue of RM46.0m (+8% YoY) and pre-tax profit of RM16.7m (+7% YoY) Average portfolio occupancy fell slightly to 70.6% (FY21: 71.6%) with average rental rate rising marginally to RM6.31psf from RM6.27psf in 4QFY21. Meanwhile, 1QFY22 revenue contributed by the hotel division increased by more than 100% YoY to RM21.5m. That said, average occupancy rates across all hotels in the Group remain low during the first quarter of 2022 due to travel restrictions imposed then by the Government but this is expected to improve after 1 May 2022 when most of these restrictions are either relaxed or removed.
Source: PublicInvest Research - 31 May 2022