FY24 distributional income were within our and consensus forecast. Total DPU of 10.7 sen in FY24 was near our estimate of 11 sen resulting in a distribution yield of 4.9%. We maintain HOLD on IGB REIT as the stock continues to trade at premium valuation of 1.9x FY25F NAV. We see that positives from the completed AEIs for TGM and south court of MGM have already been priced in. No formal announcement yet from the much-awaited potential injection of Mid Valley Southkey megamall into the REIT. Until then, we see limited increase in distribution yield. Our TP has been revised slightly to RM2.34/unit from RM2.28/unit after changing the base year in our DDM to FY25. Our TP implies a target yield of 5.2%. Neutral 3-star ESG rating is maintained.

• FY24 distributional income was within expectations. Distributional income of RM395.9mil in FY24 accounted for 102.6% of our estimate and 103.7% of consensus forecast. FY24 distributional income rose marginally by 2.6% YoY contributed by higher gross revenue of 3.6% YoY. Property operating expenses rose by 8.9% YoY attributed mainly to higher utilities, maintenance, and reimbursement expenses. As a result, NPI increased only slightly by 1.7% YoY to RM455.7mil.
• Occupancy rate for Mid Valley Megamall (MVM)/The Gardens Mall (TGM) continued to be strong at 99.97%/99.95%. The average rental reversion rate for FY24 was a positive mid-single digit. Management also guided for a mid-single rental reversion in FY25. QoQ saw a net fair value change in properties of RM233.5mil in 4QFY24 after capitalizing AEIs of RM16.5mil for MVM and TGM.
• Average gross monthly rental income higher for MVM post completion of reconfiguration works while that for TGM declined slightly. The average gross monthly rental income of MVM rose from RM16.28 psf in FY23 to RM18.10 psf in FY24. Meanwhile, the average gross monthly rental income of TGM slipped from RM15.59 psf in FY23 to RM14.94 psf in FY24. 133 leases occupying 61.2% of the NLA of TGM are due for renewal in FY25. This includes the tenants, Isetan, Jaya Grocer, and Aurum Théâtre. Meanwhile 177 leases including Mr DIY Plus taking up of 22% of the NLA of MVM will be due for renegotiations to renew tenancies in FY25.

Source: AmInvest Research - 24 Jan 2025