IGB REIT’s 9MFY17 earnings in line
KUCHING: IGB Real Estate Investment Trust (IGB REIT) saw its earnings for the first nine months of financial year 2017 (9MFY17) earnings coming within expectations.
To note, IGB REIT’s 9MFY17 core net income of RM226.2 million is largely within expectations, making up 77.9 and 77.5 per cent of MIDF Amanah Investment Bank Bhd’s ( MIDF Research) and consensus full year forecasts respectively.
No distribution per unit was declared due to it bi- annual distribution policy.
“On a sequential basis, 3QFY17 core net income climbed 22.8 per cent quarter on quarter (q- o- q) to RM83.1 million mainly due to normalized maintenance cost and write-back of step-up interest rate arising from the fixed rate term loan that was fully settled during the quarter.
“Recall that total property expenses of IGB REIT were higher in 2QFY17 due to higher maintenance and property upgrade expenses. On a yearly basis, 3QFY17 earnings were resilient by growing 20.9 per cent y- o-y, bringing cumulative earnings in 9MFY17 to RM226.2 million.
“The positive earnings growth was driven mainly by organic growth and write-back of step-up interest rate.
“Rental reversions of Mid Valley Megamall and the Gardens Mall are at around five per cent per annum, underpinned by high occupancy rates of the two malls.”
This was why MIDF Research maintained its earnings forecasts for IGB REIT in FY17 and FY18, anticipating earnings growth to be driven by organic growth of positive rental reversion, as it saw no visible asset injection in the near-term.
“We upgrade the stock to buy with an unchanged target price of RM1.73, aligning the percentage upside to the change in our stock recommendation percentage thresholds.
“We maintain our target price for IGB REIT at RM1.73, based on Dividend Discount Modelvaluation.
“We are positive on the earnings outlook for IGB REIT that likely continue to be driven by positive rental reversion, and dividend yield is attractive at 4.9 per cent.”