Current selldown presents opportunity to accumulate REIT at cheaper valuation, says RHB Retail Research

Poovenraj Kanagaraj

Due to the volatility that the current Covid-19 presents, RHB Retail Research says IGB Reit’s 1Q20 results missed expectations. While IGB REIT’s share price has largely priced in the pandemic’s negatives, having plunged 20 percent from RM 1.96 as at end February, the research house believes the current selldown presents an  opportunity to accumulate the REIT at a cheaper valuation.

The real investment trust’s 1Q20 core profit of RM 68.4 million was below expectations, coming in at 23 percent and 22 percent. Revenue for the quarter saw negative growth (-10.5% QoQ, -11.5% YoY), arising from the support granted to tenants in the face of Covid-19 and subsequent Movement Control Order.

Only 92.5 percent of income was distributed for 1Q20, which translated into a lower DPU of 1.94 sen vs 2.19 sen and 2.40 sen in 4Q19 and 1Q19. This was due to the dilution caused by an issuance of 2.99m new units for manager fees (MCO), as well as lower parking income.

“We cut our FY20F-22F earnings slightly by 1-5 percent, as we expect 2Q20 results to be weaker than 1Q, given the longer MCO effect. Correspondingly, our FY20 DPU estimate is also cut to 8.3 sen,” the research house says.

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