IGB’s 1Q below expectations

KUCHING: IGB Bhd’s (IGB) first quarter of the financial year 2020 (1QFY20) net profit came in weaker-thanexpected mainly due to losses from its hotel and property development businesses.

Public Investment Bank Bhd’s research team (PublicInvest Research) noted that IGB’s 1QFY20 net profit came in weaker-thanexpected at RM17.7 million (down 64.2 per cent yearon-year, down 70.5 per cent quarter-on-quarter), with the first quarter net profit only constituting circa 10 per cent of its full year net profit forecast.

“The letdown was mainly due to higher-than-expected losses from the hotel business and also losses from The Mall, Mid Valley Southkey, Johor Bahru which opened in April 2019, which registered pre-tax loss of RM9.2 million after accounting for depreciation (RM8.8 million) and finance cost (RM12.9 million),” it added.

It explained that IGB’s group revenue dropped by 13 per cent y-o-y in 1QFY20 to RM291.4 million mainly due to lower contributions from the property development and hotel divisions.

“Correspondingly, group pre-tax profit decreased by 44 per cent due mainly to lower contributions from the property development, property investment-retail and hotel divisions.

“In 1QFY20, group property investment-retail from IGB REIT reported total gross revenue and net property income of RM125 million and RM88.4 million respectively, a decrease of about 11 per cent y-o-y and 15 per cent y-o-y. The Mall, Mid Valley Southkey, Johor Bahru which opened in April 2019, contributed revenue of RM28.5 million to the property investment-retail division but contributed pre-tax loss of RM9.2 million.

“As for the property investment-commercial division, average occupancy of the offices was still above 80 per cent with average rent steady at RM6 per square feet,” it said.

On IGB’s proposed listing of its IGB Commercial REIT, PublicInvest Research noted that the group has also proposed a restricted offer for sale and distribution-inspecie.

“We reckon the value of the commercial assets is estimated to be in excess of RM3 billion. Assuming IGB is keeping a 51 per cent stake, the listing could monetise at least RM1.5 billion for shareholders.

“Despite the pandemicinduced slowdown, it is reported that management will go ahead with the REIT listing this year,” it said.

PublicInvest retained its ‘outperform’ call on the stock.