Period  4Q13 / FY13

Actual vs. Expectations FY13 realised net income (RNI) of RM207.0m came in well within expectations, making up 101% of both street and our estimates.

Dividends  GDPU of 3.61 sen was declared for 2H13, which includes a 0.09 sen non-taxable portion. This implies FY13 GDPU of 7.04 sen (6.0% yield) or a 100% payout of distributable income.

Key Results Highlights QoQ, 4Q13 topline grew by 6% to RM114.3m and we believe this is due to the strong rental reversions of both Mid Valley (MV) and The Gardens Mall (TGM). However, due to higher operating cost (+22%) brought about by higher reimbursement cost of RM17.2m arising from MV, RNI decreased by 1% to RM53.1m. PAT increased by 194% to RM158.1m stemming from fair value adjustments of RM105.0m on both Mid Valley (MV) of RM60m and The Gardens Mall (TGM) of RM45m.

 YoY, 4Q13 GRI grew by 11% to RM114.3m on the back of higher rental income for both MV and TGM as both assets achieved double-digit rental reversions in FY13. FY13 was a major lease expiry year, with 27% and 54% of occupied NLA for MV and TGM up for renewal. This was sufficient to offset the increase in operating cost (+17%) due to similar reasons as stated above, while reimbursements cost for 4Q12 was less than 4Q13 by 20.4%. This allowed for an 8% increase in RNI.

Outlook  Management has previously guided that they expect 10%-15% reversions on leases up for expiry in FY14E, which is substantial as 37% and 31% of NLA for MV and TGM will be expiring.

 The group remains quiet on the acquisition front and we do not expect any near-term acquisitions due to the low cap rate environment. However, IGB REIT is more than capable to finance potential acquisition due to its current low gearing levels of 0.24x.

Change to Forecasts No material changes to our estimates, post-housekeeping.

We continue to estimate FY14E and FY15E GDPU of 7.34 sen and 7.58 sen (6.3%and 6.5% gross yields), respectively.

Rating Maintain MARKET PERFORM

Valuation  No changes to our TP of RM1.23 based on FY14E target gross yield of 6.0% (net: 5.4%).

 We maintain our MARKET PERFORM call as we see minimal DPU catalysts and expect acquisitions to be slow given the low cap rate environment. Further upsides to TP hinges on yield accretive acquisitions and bond yield compressions.

Risks to Our Call  Bond yield expansion or compression vs. our target 10-year MGS yield.

Source: Kenanga