- We reaffirm our HOLD recommendation on IGB REIT (IGBR), with an unchanged fair value of RM1.38/unit, based on a 10% discount to our DCF value.

- IGBR’s 1HFY13 realised net profit reached RM100mil – in-line with expectations – representing about 50% of our FY13 estimate of RM201mil and 49% of consensus estimates.

- IGBR declared a 3.43 sen dividend for 1HFY13, which is in-line with our DPU estimate of 5.9 sen.

- Operationally, the underlying performance was solid. Realised net profit grew 3%, on the back of a 5% revenue growth. This was mainly due to positive rental reversions.

- The next key catalyst for IGBR is the rental renewal for Gardens Mall this year, where 54% of NLA is expiring. In tandem with management’s guidance of a 15% rental reversion, we are estimating a 13% rental reversion, underpinned by the Garden Mall’s relatively young mall and premier positioning.

- Organic growth remains as the key driver given that acquisitions are unlikely to happen in the immediate-to medium-term.

- The upcoming Southkey Mega Mall and 18@Medini are potential injections from its sponsors. However, construction of these malls could take a good five years, at least.

- No change to our EPU forecast. At current levels, dividend yields are hovering between the 4%-5%, for FY13F-FY15F. Our HOLD call is notably premised on the absence of nearterm acquisitions to re-rate the stock.

- CMMT (FV: RM2.15/unit) is our top REIT pick in Malaysia, underpinned by its first-mover acquisition advantage, in our view.

Source: AmeSecurities