KUALA LUMPUR: Kenanga research maintained a market perform recommendation and target price of RM1.80 on IGB REIT following the release of its 1H19 earnings that came within expectations.
"Our FY19-20E CNP is driven by low-to-mid single-digit reversion for both assets on 98% occupancy.
"Our FY19-20E GDPU of 9.61-9.71 sen (NDPU of 8.65-8.74 sen), suggest gross yield of 4.9-5.0% (net yield of 4.4-4.5%)," it said in a note today.
The research house said it expects minimal capex of RM25-10mil for FY19-20E for minor refurbishments and upkeep of both malls.
FY19 will see 23% and 44% of Mid Valley Mall's and The Gardens Mall's net lettable area up for expiry respectively.
It added that it does not expects the acquisition of Southkey Mall in Johor in the near term and expects it to take at least one reversion cycle for the asset to stabilised before being acquired by IGB REIT, likely by FY21-22.
On IGB REIT's earnings performance, Kenanga said 1H19 realised net income of RM160.8mil was 52% and 51% of its and consensus expectations
Year-to-date, top line for the six months was 4.3% higher on higher rental income mostly from positive reversion backed by stable occupancy.
NPI margin was marginally unchanged at 73% but flattish financing cost allowed RNI to increase by 5.5%, said Kenanga.
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