KUALA LUMPUR: CIMB Research has upgraded its call on IGB Real Estate Investment Trust
(IGB REIT) to an Add with target price of RM1.46.
The research house believes the current price weakness presents a buying opportunity for investors.
Sustained strong earnings growth is a potential catalyst, it said.
IGB REIT recorded core net profit of RM65.1mil, a 8.3% year-on-year gain for the third quarter ended Sept 30, 2015, on the back of 7.5% on-year growth in revenue to RM121mil.
The improvement was mainly due to higher total rental income during the period. Its net property income increased 6.4% year-on-year to RM85.2mil as its overall property operating expenses appreciated 10.4% year-on-year.
On a cumulative basis, its revenue increased 7.5% year-on-year to RM367.8mil resulting in core net profit growth of 13.9% year-on-year to RM200.9mil.
This was on the back of higher total rental income during the period, resulting in a 10.7% year-on-year jump in net property income to RM261.6mil. Property operating expenses was 0.3% higher. After adjusting for RM28.9mil in non-cash adjustments, IGB REIT’s distributable income for the nine-months grew 12.9% year-on-year to RM229.8mil.
The results exceeded CIMB’s expectations, making up 79% of its full-year forecast and 77% of consensus’.
IGB REIT also announced a dividend per unit of 2.14 sen for the third quarter, bringing the total for the nine-months to 6.61 sen. This translates into a 12% year-on-year improvement, and makes up 83.7% of CIMB’s full-year dividend forecast of 7.90 sen.
CIMB revised its financial year ending Dec 31, 2015 to 2017 earnings forecasts upwards by 3% to 9.3% and dividend per unit by 2.7% to 8.9% on stronger rental revision assumptions and due to the additional 40,000 sq ft of net lettable area expected to be added in 2015 at the Mid Valley Megamall from a reconfiguration of the existing layout.
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