IGB  REIT’s  full-year  earnings  came  in  within  estimates.  Maintain NEUTRAL with  a  revised TP of MYR1.40  (6.9% upside).  We expect the REIT’s short-term earnings to be affected by the slowdown in consumer sentiment.  That  said,  we  still  see  some  growth  potential  from  The Gardens Mall. Furthermore, the expected completion of nearby projects over the next 1-2 years could help to boost shopper traffic.

Within  expectations.  IGB  REIT’s  4Q14  core  net  profit  of  MYR56.2m (+5.9%  YoY,  -6.5%  QoQ)  brought  FY14  net  profit  to  MYR232.6m (+12.4%  YoY),  in  line  with  our  and  consensus  estimates.  Net  profit continued to be driven by higher income from The Gardens Mall’s (TGM) major rental renewal in 3Q13  as well as Mid  Valley Megamall’s (MVM) continuous tenancy remixing  effort.  A DPU of 3.89  sen was declared for2H14, bringing total FY14 DPU to 7.79 sen.

Future  outlook.  Looking  into  2015,  in  line  with  other  retail  peers,  we expect  the  REIT to similarly  be  affected  by  the  slowdown in  consumer sentiment  due  to  the  volatile  macroeconomic  environment  and  the implementation of  the goods and services tax (GST).  That said,  we still see  some  growth  potential from  TGM,  which  currently  only  contributes about 35% to the REIT’s topline and  is still commanding a lower rental rate vs  the more matured  MVM.  Furthermore,  organic growth  could be further  boosted  by  the  expected  increase  in  population  in  the surrounding area  going forward, as IGB Corporation (IGB MK, NR) and SP  Setia  (SPSB  MK,  BUY,  TP:  MYR4.08)  are  due  to  complete  their projects in the vicinity progressively within the next 1-2 years.   

Forecasts. We revise  our  FY15-16  earnings  forecasts by less than 5% after updating our FY14 figures. We also introduce our FY17 figures.

Maintain  NEUTRAL.  We  raise  our  DDM-based  TP  to  MYR1.40  (from MYR1.35) after  rolling over our base period.  We expect TGM to still be the REIT’s main growth driver going forward. IGB REIT continues to offer a decent dividend yield of above 5%.

Source: RHB