- We reiterate our HOLD recommendation on IGB REIT (IGBR), with an unchanged DCF-derived fair value of RM1.38/unit, as we roll forward our valuations to FY14F and adjust our risk free rate to account for the higher bond yield environment.

- IGBR’s 9MFY13 realised net profit of RM180mil exceeded our and consensus expectations, accounting for 89% and 88% respectively.

- The better-than-expected 9MFY13 results were due to higher contributions from the other income segment – a 14% increase compared to the pro-rated 9-month profit forecast provided by the company. The other income contributions arise from car park and advertising and promotion.

- We have tweaked our FY13F-FY14F earnings upwards by c.17% to reflect better-than-expected contribution from its other income segment.

- Given that the group will be growing organically due to lack of near-term acquisitions in the pipeline, we now project realised net profits of RM237mil for FY13F, RM253mil for FY14F and RM266mil for FY15F.

- We continue to estimate a 13% rental reversion for Garden Mall this year as tenancy for 54% of net lettable area will be expiring.

- No distribution was declared for this quarter. Distribution income declared to-date amounted to 3.43sen.

- The market value of Mid Valley Megamall and The Gardens Mall stood at RM3.5bil and RM1.2bil respectively as at October 2013.

- Its sponsor, IGB Corporation had just started construction of Southkey Megamall in Johor, located within Zone A in Iskandar. The mall offers a net lettable area of 2.5mil sf. Phase 1 will comprise of 1.5mil sf with completion by late-2016. However, this mall is a long-term catalyst for the group as it would take at least 8 years for an injection to take place.

- In view of the lack of near-term acquisitions in the pipeline to catalyse the stock, we maintain our HOLD call.

- Our top BUY within the REIT sector is CapitaMalls Malaysia Trust (CMMT, FV: RM2.15/unit) given its first acquisition mover advantage. Acquisition could potential centre on Queensbay Mall, which is accretive to overall DPU, or Tropicana City Mall (a letter of intent was granted to explore the opportunity for acquisition).

Source: AmeSecurities