IGB REIT’s FY22 core net profit of RM336.2m (+68.0% YoY) is within ours and consensus expectations. Declared 3QFY22 DPS of 2.44 sen. We are pleased with IGBREIT’s FY22 showing as its performance has already exceeded its pre - pandemic level (FY19). Moving into FY23, we believe the momentum should sustain, aided by the impending festive seasons in 1H23 (i.e. Chinese New Year and Hari Raya Aidilfitri). Also, we anticipate positive rental reversion for its tenancy renewal in FY23. Maintain BUY and TP: RM1.89.

Results inline. 4QFY22 core net profit of RM83.9m (+0.7% QoQ, +14.1% YoY) lifted FY22 sum to RM336.2m (+68.0% YoY). The results is within ours and consensus expectations at 102%. Core net profit was arrived upon excluding RM60m fair value gain on its properties.

Dividend. Declared 4QFY22 DPS of 2.46 sen, bringing FY22 to 9.86 sen (SPLY: 2.17 sen and 6.03 sen, respectively).

QoQ. Revenue rose (+6.1%) but was mitigated by higher property opex (+10.6%) arising from increasing reimbursement and upgrading costs. Hence, NPI rose at a slower clip (+4.4%). Meanwhile, core net profit saw flattish performance (+0.7%) as it was dragged by lower interest income (-64.0%).

YoY/YTD. Top line grew (+24.6% YoY, +39.3% YTD), attributable to lower rental support in FY22 and improving tenant sales which stemmed from the economic reopening and improving retail sales. Although mitigated by higher property opex (+67.6% YoY, +9.4% YTD) due to increased utilities expenses and reimbursement and upgrading costs, NPI grew by 12.8% YoY and 52.8% YTD and subsequently lifted core net bottom line (+14.1% YoY, +68% YTD).

Occupancy and gearing. Both properties, Midvalley Megamall and The Gardens Mall’s occupancy remained fully occupied. Gearing stood at 23%.

Outlook. We are pleased with IGBREIT’s FY22 showing as its performance has already exceeded its pre-pandemic level (FY19). Moving into FY23, we believe the momentum should sustain, aided by the impending festive seasons in 1H23 (i.e. Chinese New Year and Hari Raya Aidilfitri) which will continue supporting footfall and retail sales of the malls. Taking cue from the robust occupancy rates of its properties, we anticipate blended rental reversion for IGBREIT to remain positive in 2023.

Forecast. We maintain our forecasts as results are inline.

Maintain BUY, TP: RM1.89. Our TP is based on FY23 DPU on targeted yield of 5.7% which is derived from 5-year historical average yield spread between IGB REIT and 10-year MGS yield. We continue to like IGB REIT due to (i) its prime asset location to capitalise on the strong recovery in domestic footfall, (ii) robust occupancy rates and (iii) monthly rental income exceeding pre-pandemic levels.

Source: Hong Leong Investment Bank Research - 20 Jan 2023