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Dragged by hotel business, IGB 2Q net profit falls 20%

KUALA LUMPUR (Aug 28): IGB Bhd’s net profit for the second quarter ended June 30, 2019 (2QFY19) fell 20% to RM32.86 million, from RM41.27 million for the previous year’s corresponding quarter, dragged by lower contribution from its hotel division.

This was despite revenue rising 8% year-on-year to RM317.06 million from RM293.5 million, amid higher contribution from the property development and property investment-retail divisions, its filing with Bursa Malaysia yesterday showed.

The group’s property investment–retail division, represented by IGB Real Estate Investment Trust, posted a higher net property income of RM98.5 million, up 9% from the previous year.

The property development division, meanwhile, saw a higher revenue recognition of RM22.1 million, versus RM20.3 million in the previous year, due to a higher recognition of percentage of completion in respect of the Stonor 3 development.

However, the hotel division’s revenue declined 12% to RM62.7 million amid lower average occupancy rates and average room rates across most of the hotels owned by the group.

For the first half of its financial year, its net profit was up 9% at RM82.31 million from RM75.35 million a year earlier. Revenue rose 11% to RM650.82 million from RM587.69 million.

The group expects its hotel division to still see lower average occupancy rates this year, while its property investment and development divisions will still face challenging conditions.

However, the group’s retail malls and office buildings’ prime locations should provide satisfactory contributions to the group, it said, adding that its Mid Valley Southpoint offices, having obtained their certificate of occupation in July last year, are expected to contribute positively to its property investment business.

IGB shares fell three sen or 1.08% to RM2.75 yesterday, with a market capitalisation of RM1.9 billion.

This article first appeared in The Edge Financial Daily, on Aug 28, 2019.

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