- IGB and Selia Pantai ' developer of SouthKey ' yesterday signeda conditional MoU to establish a 70:30 jointventure to co-develop 3 parcels ofleasehold land measuring 36acres within the SouthKey development. This is not asurprise given that IGB has indicated it has been looking for pockets of landin Johor for development.
- Selia Pantai is a public-private partnership between SeliaGroup and the Johor State Government via its arm, Kumpulan Prasarana RakyatJohor (KPRJ).
- The JV intends to co-develop a megamall and possibly othercommercial/residential properties including hotel, serviced apartments andoffices. We note that the megamall would have an NLA of circa 1.5mil sf 'almost as big as MidValley MegaMall -with close to 7,000 parking bays.
- To recap, SouthKey is a mixed commercial development spanningover 300 acres within Permas Jaya which enjoys frontage of Jalan Tebrau, JalanBakar Batu as well as the recently-completed Eastern Dispersal Link. It is locatedjust five minutes away from Sultan Iskandar Customs, Immigration and Quarantine(CIQ) complex.
- We view this positively because:- (1) we believe the mall wouldbe a success given the area's sizeable catchment population of more than120,000 and the lack of quality malls within it.
- At present, the total NLA in Johor Bahru is estimated to beat 11.6 million sf with an average occupancy rate in excess of 80%. In the pipeline includes a lifestyle mall (GFA:1mil sf) by Iskandar Investment Bhd located at Medini North and theredevelopment of Komtar retail mall (GFA: 0.4mil sf) in Johor Bahru CBD.
- (2) IGB is rebuilding its retail mall portfolio whichwould provide a new stream of income and is very much in-line with its businessmodel of developing and growing investment properties.
- We estimate the mall would provide an additional NOI of RM50mil(or accounts for 14% of our NOI estimate for FY12F) p.a to IGB, assuming an NLAof 1.5mil sf, a conservative rental rate of RM5psf and occupancy rate of 70%.Plus assuming a 7% cap rate the mall would provide a decent 5% uplift to ourNAV estimate.
- We continue to like IGB Corp because the group is lookingat crystallising the deep value of its retail malls in Mid-Valley City 'triggered by high implied capital values. The group would likely to follow upwith an office and hospitality REITsubsequently. Our fair value is maintained at RM3.50/share.