IGB Berhad’s (IGB) losses narrowed to RM8.0m in 1QFY21 from RM10.4m a quarter ago, with its main assets still struggling due to pandemic restrictions though partially supported by disposal of a piece of land in Bentong. The results were below our expectations. While we believe its overseas assets could see some recovery in the next few quarters, its local assets could take longer than expected to normalize until domestic vaccinations gain more traction in 2H2021 given the full MCO announced over the weekend. We revise FY21 earnings estimate downwards by 61% given the latest negative development on the lockdown. Elsewhere, the proposed listing of its commercial assets has already been approved while other new ventures such as 18@Medini (a mixed development in Iskandar Malaysia), mixed-use development project in Bangkok (6 acres) and the offer for the 1.9-acre land in London are now put on hold due to the current difficult market conditions. All told, we maintain our Outperform call with TP of RM3.45 however, pegged at c.65% discount to our RNAV estimates as we still believe in the long-term attractiveness of its assets. Key catalyst near term is the proposed listing of its commercial assets and also potential sale of its non-core assets.

• 1QFY21 revenue dropped 19% YoY to RM234.6m due to lower contributions from all business segments. Correspondingly, Group pre tax profit decreased by 71% to RM17.9m YoY primarily affected by the MCO restrictions
  
  In 1QFY21, property investment-Retail (IGB REIT) reported total gross revenue and net property income of RM99.4m and RM62.4m respectively or a decrease of c.20% and c.29% YoY respectively. Meanwhile, The Mall, Mid Valley Southkey, Johor Bahru contributed a lower revenue of RM24.8m (-13% YoY) but recorded pre-tax loss of RM10.3m (+12% YoY) after accounting for depreciation of RM9.1m and finance cost of RM9.2m.
  
  Property Investment – Commercial division (Offices) contributed gross revenue and pre-tax profit of RM42.4m and RM15.6m respectively, a decrease of c.5% and c.36% YoY respectively. Average occupancy rates in 1Q2021 for the Group’s commercial building were above 70% with average rental rates at RM6.00psf.
  
  Meanwhile, the Hotel division saw its revenue dropping sharply again in 1QFY21, down by 74% to RM10.3m as a result of lower average occupancy rates across all hotels in the Group when compared to the corresponding period in the previous year This is due to on-going travel restrictions under the current MCO imposed by the Government

Source: PublicInvest Research - 31 May 2021