The Gardens Mall

 

 

 

 

 

 

 

 

 

 

 

 

IGB Real Estate Investment Trust (April 6, RM1.54)

Downgrade to hold from buy with a target price (TP) of RM1.57: IGB Real Estate Investment Trust’s (IGB REIT) share price registered the strongest performance among its peers, appreciating 8% since our upgrade in February and 20% year to date (sector: 9%). We think the market has priced in IGB REIT’s quality assets as well as the potential assets to be injected by its sponsor.

After dragging for 1.5 years, the land amalgamation process for Mid Valley SouthKey is finally concluded, with the completion of the much-touted SouthKey mall to be delayed until end-2018. We understand that the conditions that could not be agreed upon previously between the Johor state government and IGB Corp Bhd (sponsor of IGB REIT) include the state government’s involvement in operating the mall — rentals, tenant selection and store location. However, after a few discussions, all factors causing the delay have been dealt with.

As IGB REIT has extensive experience in managing malls, management remains confident that Mid Valley SouthKey will be another success story as they will manage it the way they manage the other malls they have.

The tenant mix at Mid Valley SouthKey will be similar to that of Mid Valley Megamall in Kuala Lumpur as management is trying to position the mall to meet the needs of medium-/high-end shoppers. We have also gathered that the current tenants at Mid Valley Megamall have already shown an interest in Mid Valley SouthKey, although there is no committed occupancy at this stage.

Tenant sales at Mid Valley Megamall and The Gardens Mall in 2015 showed consistent improvement at an average of 8% year-on-year — compared with its peers’ 1%.

We are positive on this development considering that despite the gloomy outlook on consumer spending, IGB REIT managed to record constant tenant sales growth last year as it did in 2014 — thanks to heavy footfall and strategic location. Downgrade from “buy” to “hold” with a TP of RM1.57. — UOB Kay Hian Pte Ltd, April 6

Sometimes, even the value of your home can be a mystery. Go to The Edge Reference Price to find out.

This article first appeared in The Edge Financial Daily, on April 7, 2016. Subscribe to The Edge Financial Daily here.

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