KEY INVESTMENT HIGHLIGHTS

• FY24 earnings within expectations
• Earnings dragged by higher property expenses
• Earnings forecast maintained
• Positive earnings outlook intact
• Maintain NEUTRAL with an unchanged TP of RM2.10

FY24 earnings within expectations. IGB REIT FY24 core net income of RM368.7m came in within expectations, making up 99% and 96% of our and consensus' estimates. Note that we have excluded fair value gain on investment properties in our core net income calculations. Meanwhile, IGB REIT announced distribution per unit (DPU) of 2.5sen for 4QFY24, bringing total DPU to 10.7sen in FY24 which translates into gross distribution yield of 4.9%.

Earnings dragged by higher property expenses. Sequentially, 4QFY24 core net income eased to RM85.5% (-7.8%qoq) despite higher topline (+2%qoq) as earnings were dragged by higher expenses. IGB REIT incurred higher property expenses in 4QFY24 due to higher upgrading and maintenance costs. On yearly basis, 4QFY24 core net income declined to RM85.5m (-8%yoy), mainly owing to higher property expenses. That brought full year earnings in FY24 at RM368.7m (+2.7%yoy). The marginal earnings growth in FY24 were mainly driven by the positive rental reversion of Mid Valley Megamall and The Gardens Mall as footfall and tenant sales remains encouraging.

Earnings forecast maintained. We maintain our earnings forecast for FY25F/26F. We also introduce our earnings forecast for FY27F. We see stable earnings outlook for IGB REIT which will be driven by organic growth of positive rental reversion of Mid Valley Megamall and The Gardens Mall. Occupancy rates of the two malls remains encouraging at close to 100% due to high shopper footfall and strategic location of the malls.

Maintain NEUTRAL with an unchanged TP of RM2.10. We maintain our TP for IGB REIT at RM2.10, based on Dividend Discount Model.

While we see stable earnings outlook for IGB REIT which will be supported by rental growth of Mid Valley Megamall and The Gardens Mall, we see that the positives are largely priced in while share price upside is limited. Hence, we maintain our NEUTRAL call on IGB REIT. Meanwhile, net distribution yield is estimated at 4.5%.

Source: MIDF Research - 24 Jan 2025