IGB Real Estate Investment Trust’s (IGBREIT) 1QFY24 net profit came in at RM102.3m (+6.4% YoY, +10.1% QoQ) which is largely within our and consensus expectations. 1QFY24 realised net profit constituted about 26.5% and 26.9% of our and consensus full year estimates. Based on the latest valuation reports, the fair value of Mid Valley Megamall (MVM) and The Gardens Mall (TGM) remained at RM3.79bn and RM1.40bn respectively, unchanged from the previous quarter though it expensed off RM2.7m for subsequent capital expenditures. IGBREIT’s 1QFY24 revenue was RM162.6m (+2.6% QoQ), while net property income (NPI) rose 7.8% QoQ to RM124m. Profit after taxation edged up 11.1% QoQ to RM99.6m. The results improvement is mainly due to positive rental reversions achieved during the quarter. 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.

• 1QFY24 revenue rose 5.1% YoY and 2.6% QoQ to RM162.6m, while netproperty income (NPI) rose 4.8% YoY and 7.8% QoQ to RM124.0m. Profitafter taxation edged up 3.5% YoY and 11.1% QoQ to RM99.6m. The resultsimprovement is mainly due to positive rental reversions achieved during thequarter, translating into higher rental income collected. The distributableincome for the current quarter amounted to RM109.4m, consisting of realisedprofit of RM102.3m, the non-cash adjustments arising mainly from net fairvalue change of RM2.7m and Manager’s management fee payable in Units ofRM6.7m.

• Mid Valley Megamall’s occupancy dropped slightly from 99.9% to 88.6%QoQ as Metrojaya surrendered 200,403 sf on 26 March 2024, with the vacatedspace currently undergoing reconfiguration works. We believe it should nothave any problem filling up the space as the mall is virtually fully occupied overthe years. No change to The Gardens Mall occupancy which remains at99.9%. Average gross monthly rental income for Mid Valley Megamall is nowat about RM19.84psf (from RM16.28psf in 4QFY23 and RM15.28psf in FY22).Meanwhile, The Gardens Mall’s average rent increased to RM16.09psf fromRM15.59psf in 4QFY23 (vis-a-vis RM13.39psf in FY22). For FY24, Mid ValleyMegamall has 214 leases up for renewal (31.02% of total net lettable area(NLA)) while The Gardens Mall has 104 leases expiring in FY24 (22.3% oftotal NLA).

Source: PublicInvest Research - 18 Apr 2024