Results in line; maintain HOLD
4Q21 results were within our and consensus’ expectations. Earnings was flat YoY, but jumped 91% QoQ mainly due to improved revenue from higher occupancy rates and lower rental rebates. IGBREIT has also declared a 4th gross DPU of 2.17sen (FY21: 6.03sen). We lower our FY22-23E earnings by 2%/3% but maintain our DDM-TP of MYR1.65 (ke: 7.8%). Maintain HOLD. We prefer Axis (AXRB MK, SP MYR1.84, BUY, TP MYR2.30).
Stronger profit margin in 4Q21
4Q21 net profit was MYR73.6m (+2.1% YoY, +91% QoQ), bringing FY21 core net profit to MYR200.1m (-15.5% YoY), accounting for 102%/101% of our/consensus’ estimates. Despite lower YoY rental income (-24%), earnings was flattish due to lower operating expenses, namely reimbursement costs (-88%). Meanwhile, the QoQ earnings was higher mainly due to lower rental support provided to tenants, the latter being supported by high occupancy rates (MidValley Megamall: 99.6%, The Gardens Mall: 99.5% as at end-FY21). NPI was also cushioned by reversal of impairments made for trade receivables. Overall, FY21 NPI margin was up 0.8ppts to 69% (FY20: 68%).
Lower FY22/23E earnings
We lower our FY22/23E forecasts by 2%/3% after adjusting for FY21 results and non-operating expenses assumptions. Subsequently, we also rollforward our DDM-valuation base year to FY22 which has resulted in an unchanged TP of MYR1.65. We also introduce our FY24 forecasts.
Longer-term outlook still positive
Our medium to long-term outlook for IGBREIT remains positive as the prominent locations of its malls will attract high shopper traffic. This, in turn, would ensure high demand for IGBREIT’s retail space. In addition,
low gross gearing of 0.23x will give it room to fund sizeable acquisition(s) of retail assets in the future.