IGB Real Estate Investment Trust (IGBREIT) registered 4QFY23 realised net profit of RM92.9m (+10.2% YoY, +4.2% QoQ) which came in within our and consensus expectations. For FY23, realised net profit of RM359.1m (+6.8% YoY) was about 97% and 99% of our and consensus full year estimates. Based on the valuation reports dated 8 January 2024, the fair value of Mid Valley Megamall (MVM) and The Gardens Mall (TGM) as at 31 December 2023 remained at RM3.790bn and RM1.396bn respectively, unchanged from the previous quarter. YTD, Group net property income (NPI) was higher by 6.6% YoY to RM447.9m, while profit after taxation was RM517.6m, increasing by 30.7% YoY mainly due to the higher rental income achieved during the year. All told, we maintain our earnings estimates and reiterate our Neutral call with RM1.72 TP. The stock is fairly valued in our view given rising competition from new malls and inflationary pressure on consumer spending.

• FY23 revenue rose 8.6% YoY to RM604.3m, while NPI was higher by 6.6% YoY to RM447.9m and profit after taxation grew 30.7% YoY to RM517.6m. The higher total revenue and net property income were mainly due to the higher rental income achieved during the year. Meanwhile, the higher profit after taxation was mainly due to the higher rental income and the net fair value changes of RM158.6m in relation to two mall assets in FY23. The distributable income for FY23 amounted to RM385.8m, consisting of realised profit of RM359.1m and the non-cash adjustments arising mainly from net fair value changes of RM158.6m and Manager fee payable in units of RM25.3m.

• Both assets fully occupied. Both assets in the portfolio are still fullyoccupied with rental income rising in tandem with the improved tenants' sales. Average gross monthly rental income for Mid Valley Megamall is now at about RM16.28psf (from RM16.26psf in 3QFY23 and RM15.28psf in FY22). Meanwhile, The Gardens Mall’s average rent increased to RM15.59psf from RM15.43psf in 3QFY23 (vis-a-vis RM13.39psf in FY22). For FY23, Mid Valley Megamall has 234 leases up for renewal (40.2% of total net lettable area (NLA)) while The Gardens Mall has 113 leases expiring in FY23 (26.7% of total NLA). We believe it will maintain its healthy occupancy throughout FY24 again.

Source: PublicInvest Research - 31 Jan 2024