4Q15 earnings met expectations. At an unchanged MYR1.50 TP, we downgrade IGB REIT to NEUTRAL, given a lower 9% upside. The nearlyflat growth in topline suggests the declining consumer spending during that period. The outlook remains challenging as a further plunge in crude oil prices in 1Q16 would likely dampen consumer sentiment. Our preference among the REITs is Pavilion REIT.

In line. IGB REIT’s 4Q15 earnings were within our and market expectations. The nearly flat QoQ and YoY growth in revenue (compared with around 6% QoQ growth in the past two years) signalled the weakening consumer confidence during the period. This is despite the holiday and festive seasons during the year end, which is typically a stronger period. In line with our estimate, a DPU of 1.76 sen was proposed for the quarter, bringing FY15 DPU to 8.79 sen, representing a yield of 6.4%. This is higher than last year’s 7.79 sen.

Outlook remains challenging. During our recent meeting, management maintained its cautious stance on the overall retail outlook for 2016. That said, the impact of slower growth, if any, is likely to be seen only from 2Q16 as 1Q earnings are expected to be buoyed by the spendingleading up to the Chinese New Year in February. Overall, organic prospects ought likely to remain intact, as management has guided that it has started its tenancy renewals for FY16, and some tenants (including anchor tenants) have already renewed their leases. In our view, nonrenewal risk would likely be low, but rental reversion/growth may be lower, given the less encouraging economic climate.

Earnings forecasts and risks. Our FY16-17 forecasts are lowered by <5% after updating our FY15 numbers. A key risk to our forecasts would be an unexpected positive turn in consumer spending.

Downgrade to NEUTRAL. We maintain our DDM-based TP of MYR1.50, but given the lower upside of 9%, we downgrade to NEUTRAL. Among the REITs, our preference is Pavilion REIT (PREIT MK, BUY, TP: MYR1.72) as its management is stronger in our view, given its track record in tenancy mix, creation of additional high-yielding NLA. We expect its recent acquisition of da:men and The Intermark malls to drive stronger earnings growth in FY16.