According to MIDF report, the research company’s views on IGB REIT’s 1HFY22 earnings are slightly above expectations the core net income of RM168.9m came in slightly above expectations, making up 57% of consensus full-year estimates. The positive deviation was mainly due to the stronger than expected earnings in 2QFY22.
Meanwhile, a DPU of 2.45sen (ex-date: 9th August 2022) was announced for 2QFY22, bringing cumulative DPU to 4.96sen in 1HFY22. Sequentially, 2QFY22 core net income was little changed at RM83.5m (-2.2%qoq) as shopper footfall remains stable in 2QFY22 which was driven by the festive season. Note that rental income and turnover rent was supported by Hari Raya shopping spree. On yearly basis, 2QFY22 core net income was higher (+88.4%yoy) as the rental income was weighed by rental support to tenants in 1QFY21. That brought cumulative core net income to RM168.9m (+91.8%yoy) in 1HFY22.
Earnings recovery of IGB REIT was decent, underpinned by lower rental support to tenants and higher footfall at Mid Valley Megamall and The Gardens Mall following relaxation of movement restriction. Earnings forecast revised upwards. MIDFs revises its FY22/23F earnings forecast by +6.6%/+6%. We remain positive on earnings outlook on IGB REIT as we see the recovery in shopper footfall at Mid Valley Megamall and The Gardens Mall should improve rental reversion outlook and
support earnings growth going forward.
Maintain BUY with a revised TP of RM1.78. Corresponding to the upward revision in earnings, TP is revised to RM1.78 from RM1.72. Valuation is based on the Dividend Discount Model (DDM). MIDF maintains a BUY call on IGB REIT as it likes its good quality retail assets namely Mid Valley Megamall and The Gardens Mall which will benefit from a recovery in shopper footfall following the reopening of the economy. Occupancy rates of the two malls remain stable at close to 100%. Meanwhile, dividend yield is estimated at 5.2%.
