Maybank Investment remains positive on IGB REIT’s resilient earnings

PETALING JAYA: Maybank Investment Research says IGB Real Estate Investment Trust’s 2Q18 results and second interim net dividend per unit of 2.14 sen are within expectation.

The research house maintained its FY18-20 earnings estimates and target price of RM1.85, while stating that IGB REIT remained its preferred retail REIT pick.

It said 2Q18 net profit of RM70.2mil brought 1H18 earnings to RM52.4mil, which was within its and consensus FY18 net profit forecasts.

It added that 2Q18’s year-on-year earnings were mainly driven by lower opex at the malls on the back of sustained high occupancy rates, positive rental reversions and positive tenant sales growth. This is despite lower quarter-on-quarter earnings due to the tenant sales growth in 1Q18 being lifted by the Chinese New Year festive shopping.

“Our earnings estimates are intact for now. We are anticipating stronger year-on-year (y-o-y) rental income growth in 3Q18, driven by accelerated tenant sales following the zero-rating of goods and services tax from June 1 to Aug 31.

“Subsequently, we also expect tenant sales to ease in 4Q18 after the implementation of sales and services tax on Sept 1. Turnover sales account for about 12% to 15% of IGB REIT’s rental income.”

Maybank Investment said it remained positive on IGB REIT’s resilient earnings, which were largely back by its two malls’ prominent location, which sustain its rental rates and high occupancy rates.

“In the long term, we also look forward to the injection of SouthKey MidValley Megamall in Johor but we expect the acquisition of the asset to only take place beyond FY21.”