IGB Real Estate Investment Trust (IGBREIT) netted 2QFY24 realised net profit of RM88.2m (+8.5% YoY, -13.8% QoQ) which is largely within our and consensus expectations. YTD, Group 1HFY24 realised net profit of RM190.5m (+7.5% YoY) constituted about 49.5% and 50.5% of our and consensus full year estimates. Based on the latest valuation reports, the fair value of Mid Valley Megamall (MVM) and The Gardens Mall (TGM) remained at RM3.79bn and RM1.40bn respectively, unchanged from the previous quarter though it expensed off RM6.6m for subsequent capital expenditures. In 1HFY24, the Group’s total revenue rose 5.5% YoY to RM312.5m while net property income (NPI) was higher by 5.6% YoY to RM233.7m and profit after taxation was RM181.2m (+2.2% YoY) The higher total revenue, net property income and profit after taxation were mainly due to the positive rental reversions achieved during the period. All told, we maintain our earnings estimates and reiterate our Neutral call but nudge our TP from RM1.72 to RM1.85, based on dividend yield of about 6%. The stock is fairly valued in our view given rising competition from new malls and inflationary pressure on consumer spending.

• 1HFY24 revenue rose 5.5% YoY to RM312.5m while net property income (NPI) was higher by 5.6% YoY to RM233.7m and profit after taxation was RM181.2m (+2.2% YoY) The higher total revenue, net property income and profit after taxation were mainly due to the positive rental reversions achieved during the period. The distributable income 1HFY24 amounted to RM204.0m, consisting of a profit of RM190.5m, non-cash adjustments arising mainly from net fair value changes of RM9.3m and manager fee payable in units of RM12.9m.
   
• Mid Valley Megamall back to being fully occupied (from 88.6% in 1QFY24). To recap, Mid Valley Megamall experienced a rare drop in occupancy in the precious quarter as Metrojaya surrendered 200,403 sf on 26 March 2024. As expected, the Group has successfully brought in new tenants to fill up the vacated space, demonstrating demand is still good for its retail space. Average gross monthly rental income for Mid Valley Megamall is now at about RM19.13psf (from RM19.84psf in 1QFY24 and RM15.28psf in FY22). Meanwhile, The Gardens Mall which is almost fully occupied at 99.9% is now commanding average rent of RM15.55psf, a slight drop from RM16.09psf in 1QFY24 (vis-a-vis RM13.39psf in FY22). For FY24, Mid Valley Megamall has 159 leases up for renewal (24.50% of total net lettable area (NLA)) while The Gardens Mall has 85 leases expiring in FY24 (19.29% of total NLA).

Source: PublicInvest Research - 26 Jul 2024