KEY INVESTMENT HIGHLIGHTS

• 9MFY24 earnings within expectations
• Earnings remain solid
• Earnings forecast maintained
• Downgrade to NEUTRAL from BUY with an unchanged TP of RM2.10

9MFY24 earnings within expectations. IGB REIT 9MFY24 core net income of RM283.2m came in within expectations, making up 76% and 74% of our and consensus full year estimates. IGB REIT announced distribution per unit (DPU) of 2.68sen for 3QFY24, bringing cumulative DPU in 9MFY24 to 8.26sen.

Earnings remain solid. Sequentially, 3QFY24 core net income was higher at RM92.7m (+5.1%qoq), in line with higher topline (+3.5%qoq) due to higher shopper footfall in the quarter. On yearly basis, 3QFY24 core net income was solid at RM92.7m (+4.2%yoy), bringing cumulative earnings in 9MFY24 higher at RM283.2m (+6.4%yoy). The higher earnings in 9MFY24 were mainly due to the higher rental income as a result of positive rental reversion and higher variable rent amid higher shopper footfalls. Occupancy rates of Mid Valley Megamall and The Gardens Mall remains encouraging at close to 100% due to high shopper footfall and strategic location of the malls. Looking forward, rental reversion outlook is expected to remain positive due to the high shopper footfall of the malls.

Earnings forecast maintained. We maintain our earnings forecast for FY24F/25F/26F. Earnings outlook for IGB REIT is expected to support by positive rental reversion of Mid Valley Megamall and The Gardens Mall as tenant sales of the malls remains healthy while shopper footfall is encouraging.

Downgrade to NEUTRAL from BUY with an unchanged TP of RM2.10. We maintain our TP for IGB REIT at RM2.10, based on Dividend Discount Model. While we like IGB REIT for it's the good quality of its retail assets, upside to share price is limited at this juncture. Hence, we downgrade IGB REIT to NEUTRAL from BUY. Yield of IGB REIT tapered to 4.4% after the recent run up in share price.

Source: MIDF Research - 29 Oct 2024