IGB Reit 1Q24 core net profit and 1st interim gross DPU of 2.96 sen were within expectations says Maybank IB in its stock analysis. The earnings forecasts and DDM-TP of MYR1.75 (Ke: 8.2%) are unchanged. CY24E net DPU yield of 5.7% is slightly below the sector’s average of 5.9%. For retail REIT the house said it prefers Pavilion REIT
Sustained rental income growth
1Q24 core net profit of MYR102.3m is 27% of and consensus’ full-year estimates respectively. 1Q24 YoY earnings growth was driven by a higher rental income (+5.1%) coming from: high occupancy rates at both Mid Valley and Gardens Malls, positive rental reversions, and (iii) higher turnover rent. QoQ, earnings growth was driven by higher revenue (+2.6%) and lower operating expenditure (-11.4%), mainly maintenance (-24%) and upgrade costs (-65%).
Awaiting next growth booster
Maybank said it remains confident that IGBREIT could sustain a decent organic growth, backed by expected high occupancy rates and positive rental reversions at both its Klang Valley malls. At the moment there is no timeline for IGBREIT to exercise its right for first refusal to acquire Mid Valley Southkey in Johor Bahru from its sponsor; the house expect it to wait after another rental cycle in End-1Q24 gross gearing remains low at 0.22x.
Forecasts unchanged
The house maintains its FY24-26E earnings estimates. The DPU growth estimates (+3% to +5% YoY) are based on c.98-100% occupancy rates, single-digit positive rental reversions and 98% DPR. The 200k sq ft. or 11% of total NLA at Mid Valley Megamall is undergoing reconfiguration works since 26 Mar 2024, expected to complete by 3Q24. The impact to rental income is limited (estimated at 1-2% of total revenue).
