IGBREIT: IGB Real Estate Investment Trust - thestockmonger

About IGBREIT

IGB Real Estate Investment Trust (IGBREIT) or IGB Reit is a REIT that owns and manages Mid Valley Megamall and The Garden Mall. It’s portfolio has a total NLA of approximately 2.67 million square feet.

Property Detail

Data based on IGBREIT Annual Report 2018

Property Name	Net Lettable Area (NLA) (sq ft)	Occupancy Rate (%)	Purchase Price (‘000)	Appraised value at 31^st December 2018
Mid Valley Megamall	1,819,777	99.3	3,440,000	3,665,000
The Gardens Mall	843,820	97.2	1,160,000	1,295,000

IGB REIT has the same properties in its portfolio since its listing.

Income Statement

	2018	2017	2016	2015	2014
Revenue	553,689	524,918	507,344	489,190	461,768
Net Property Income (‘000)	386,250	373,563	361,109	342,788	312,641
Distributable Income (‘000)	341,430	342,801	316,306	290,980	268,795
Investment Property	4,960,000	4,930,000	4,890,000	4,890,000	4,890,000
Property Yield	7.79%	7.58%	7.38%	7.01%	6.39%

IGB REIT has consistently increased both its revenue and NPI over the years. For FY2018, IGB REIT achieved growth in its income statement on the back of higher rental incomes.

It also recorded 7% property yield over the last 4 years and 6.39% in 2014.

However, net profit decreased by 2.80% for FY2018 due to lower fair value gain on investment properties for FY2018 and a one-time write back of step-up interest in FY2017.

Revenue and NPI by individual Properties

		2018	2017	2016	2015	2014
Mid Valley Megamall (MVM)	Revenue	375,048	366,447	354,677	340,045	318,993
	Net Property Income (‘000)	286,357	277,875	266,263	250,384	224,154
	Occupancy Rate (%)	99.3	99.9	99.9	99.9	99.0
The Garden Mall (TGM)	Revenue	160,641	158,471	152,667	149,145	142,775
	Net Property Income (‘000)	99,893	95,688	94,846	92,404	88,487
	Occupancy Rate (%)	97.2	98.0	99.7	98.0	97.6

As for individual properties, both MVM and TGM recorded consistent growth in their revenue and net profit. In addition, both malls enjoyed high occupancy rate consistently.

Balance Sheet

	2018	2017	2016	2015	2014
Investment Properties	4,960,000	4,930,000	4,890,000	4,890,000	4,890,000
Total Borrowings	1,213,925	1,213,665	1,237,229	1,233,115	1,223,586
Fixed: Floating Ratio	100:0	100:0	98:2	98:2	98:2
Gearing Ratio (%)	27.0	25.0	26.0	27.0	23.7

Since IGB REIT only owns 2 investment properties, the only way it increases its investment property value is fair value gain.

Based on the latest annual report, IGB Reit has borrowings mostly in the form of unsecured MTN with fixed interest rate of 4.38%. In other words, interest rate hike or cut will not affect IGB REIT.

Future Prospect

Based on 2018 annual report, IGB Reit has created 21 additional retail outlets and 4 casual leasing spaces after taking back space from AEON BIG in MVM. This move allowed higher rental returns to be achieved.

As for TGM, an additional 18,000 sf of retail space was increased in the lower ground floor. It now houses 12 new stores. There is an on-going bridge construction that will improve connectivity to the KTM and LRT lines, targeted to be completed by 2019.

Financial Ratios

	2018	2017	2016	2015	2014
DPS	9.19	9.28	8.71	8.19	7.79
NAV	1.0656	1.0597	1.0511	1.0558	1.0627

The management has a dividend policy of distributing at least 90% of distributable income back to the investor. Since the distributable income for FY2018 dropped slightly compared to FY2017, the DPS has also follow suit.

NAV has been stagnant because IGB REIT did not engage in new property acquisition since its listing.

Valuation

Current Price	2.02
Dividend Yield	4.55%
P/E Ratio	20.94
P/B Ratio	1.90

At the time I wrote this, IGBREIT is selling at RM2.02. It has a 4.55% dividend yield and a P/B ratio of 1.90.

What I Like and Don't Like About IGBREIT

What I Like

Resilient in both bull and bear market
Consistently grow Revenue, NPI and DPU
High occupancy
Management actively conducting AEIs
High footfall

What I don’t like

No new acquisitions (May not be a bad thing)

As the saying goes, if it ain’t broke, don’t fix it. IGBREIT is pretty much the best REIT in Malaysia in terms of its occupancy, visitors footfall and rental reversion. It manages to record growth even in the face of rising e-commerce and online shopping. Doing nothing in acquisition may be the best for the shareholders.

The only downside is that it’s always selling at a premium. I’m definitely not buying with a yield lower than 5%.

Disclaimer

This post is intended for education and entertainment purpose only. It is not a recommendation to buy, hold or sell. If you decide to act on the information shared, The Stockmonger will not be liable for any losses incurred. At the same time, we will not ask for compensation in any form if you make profits

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