KEY INVESTMENT HIGHLIGHTS

• No surprises from 9MFY19 earnings

• CNI for the period climbed 5.4%yoy to RM240.6m

• 3QFY19 CNI rose 5.3%yoy to RM79.8m

• Maintain NEUTRAL with an unchanged TP of RM1.90

No surprises from 9MFY19 earnings. IGB REIT’s cumulative core net income (CNI) of RM240.6m made up 73% of ours and 76% of consensus’ full year estimates. A DPU of 2.31 sen was announced, bringing year-to-date DPU to 6.97 sen, which is also in line with our expectation.

CNI for the period climbed 5.4%yoy to RM240.6m as revenue increased 3.5%yoy to RM412.5m primarily because of higher rental income from Mid Valley Megamall and The Gardens Mall. CNI for 9MFY19 grew faster than revenue mainly due to relatively stable finance costs and operating expenses. Meanwhile, interest income rose 8.0% to RM5.5m, helping to lift its CNI for the period.

3QFY19 CNI rose 5.3%yoy to RM79.8m while revenue added 1.9% to RM136.3m. CNI increased more than revenue due to lower property operating expenses (-4.2%yoy). Interest income for the quarter was also higher by 17.1%yoy at RM1.85m. Compared to 2QFY19, CNI inched up 2.4%qoq in line with revenue that improved by 1%qoq.

Maintain NEUTRAL with an unchanged TP of RM1.90. We make no changes to our forecast as earnings are in line. With that, we are keeping our TP of RM1.90. Our valuation based on Dividend Discount Model (DDM) valuation (Required rate of return: 7.5%, Perpetual growth rate: 1.5%), is unchanged. We maintain Neutral on IGB REIT due to limited upside. Meanwhile, dividend yield is estimated at 4.6%.

Source: MIDF Research - 24 Oct 2019