- It was reported in a local daily this morning that IGB Corp Bhd is aiming to inject assets from its property development venture into IGB REIT in five years time.

- Currently, IGB Corp’s upcoming development consist of the following projects: (1) A RM6bil mixed development of Southkey Mega Mall, which is earmarked for construction this year – a replica of Mid Valley Mega Mall. (2) Property develepor, Distinctive Group had just announced that it will jointly undertake an integrated commercial development in Medini, Iskandar with IGB Corp. The project comprises of a 7.2ha mixed development called 18@Medini, which includes retail spaces, offices, serviced apartments and a hotel, with an estimated GDV of RM2bil.

- It is comforting and positive to note that IGB REIT now has two upcoming injections from its sponsors as potential long-term catalysts, in view of the absence of visible near-term acquisition catalyst to re-rate the stock. Construction would take at least a good 5 years to complete.

- Organic growth remains as the key driver for the group via various accretive asset enhancement initiatives to push rentals and tenant mix.

- We see The Gardens Mall’s as the key elevator to rental upside, given that 54% of NLA will be undergoing rental reversion this year and its young premier mall status. In line with management guidance of 15% rental reversion, our model has an assumption of 13%.

- No change to our EPU forecasts. Our HOLD recommendation with an unchanged fair value of RM1.38/unit continues to hold up, pending near-term constructive asset injections.

- In terms of visibility of yield-accretive acquisition within the REITs theme, our top BUY is nonetheless CapitaMalls Malaysia Trust (FV: RM2.15/unit), for its first-mover advantage, which is deemed to be DPU accretive.

Source: AmeSecurities