corporate

Further upside potential for IGB REIT

KUALA LUMPUR: Affin Hwang Capital believes that the positive developments surrounding IGB Real Estate Investment Trust (IGB-REIT) have already been factored into its valuation, thereby capping further upside potential.

Consequently, the firm has maintained its "Hold" call on the group, with a revised dividend discount model (DDM)-derived target price of RM2.25 from RM2.26 previously. 

The firm also tweaked its 2025-2026 earnings per unit (EPU) forecasts after updating for the full-year 2024 results.

"Upside risk to our view would be stronger-than-expected earnings while downside risks are weak economic growth, earnings disappointment, and steeper-than-expected hikes in the overnight policy rate (OPR) and global bond yields," it said in a note today. 

Meanwhile, Affin Hwang noted that IGB REIT's results aligned with both the firm's and consensus estimates, as its 2024 realised net profit represents 98 per cent of the firm's full-year earnings forecast and 96 per cent of the consensus projection.

Post full-year results, the firm has introduced its 2027 EPU forecast. 

"We expect IGBREIT to deliver an annual core EPU growth of 1.7 to 7.4 per cent over 2025-2027 on the back of higher rental income from Mid Valley Megamall's (MVM) stronger rental reversion following the reconfiguration of the South area, primarily involving its anchor tenant, Metrojaya, as the monthly rental income increased to RM18.10 per square month in financial year 2025 (FY24), up from RM16.28 in FY23," it added. 

IGB REIT delivered a mediocre performance, with its 2024 realised net profit rising by 2.7 per cent year-on-year (YoY) to RM368.7 million, supported by higher revenue of RM626.1 million, up 3.6 per cent year-on-year. 

The revenue growth was primarily driven by increased rental income from MVM, which more than compensated for an 8.9 per cent YoY rise in operating costs.

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