IGB REAL ESTATE INVESTMENT TRUST

Business Summary

IGB Real Estate Investment Trust (IGBREIT) is a real estate investment trust that is in the business of owning and managing shopping malls, namely The Midvalley Megamall and The Gardens Mall.

Update 06.06.2019

Dividends (5/5): ⭐ ⭐ ⭐ ⭐ ⭐ 

Value (1/5): ⭐ 

Financials (5/5): ⭐ ⭐ ⭐ ⭐ ⭐ 

Growth (4/5): ⭐ ⭐ ⭐ ⭐ 

Business (5/5): ⭐ ⭐ ⭐ ⭐ ⭐ 

Reference: (i) MyKayaPlus Metrics Definition (ii) MyKayaPlus Metric Evaluation Scale


Portfolio

The Mid Valley Megamall – 1,819,777sqf

The Gardens Mall – 843,820sqf

Financial Performance

From the revenue and net property income breakdown, we can see that The Mid Valley Megamall is the crown jewel of IGBREIT. It has been contributing to growing rental income for IGBREIT. The Gardens Mall is also contributing growing revenue and rental income to IGBREIT’s portfolio as well

Distributable Income

When investing in a REIT, we become the owners of high-quality investment property that are able to command good rental. After deducting operating expenses from the rental collected by the tenants, a REIT is required to pay out the rental money to its stakeholders in the form of a distribution income (dividend). IGBREIT has been paying out increasing distribution income each year. Distribution Per Unit is also on a rising trend. 

Net Asset Value

Of course, apart from collecting rental, it would be great that the property that a REIT owns also increases in value. The properties held by IGBREIT has been showing a stable increase in terms of market value and also the cash level. The NAV per unit is also showing an upward trend.

 

Balance Sheet 

YearAssets (RM’000)Liabilities (RM’000)Unit Holder’s Capital (RM’000)Current RatioGearing Ratio (%)
20185,202,9661,436,2753,766,6910.9923.33%
20175,250,7281,527,4293,723,2990.9423.11%
20165,194,2571,522,2743,671,9831.1823.82%
20155,170,0071,504,4983,665,5091.0923.85%
20145,156,7801,493,3223,663,4581.0523.73%

As of 2018, IGB REIT has Assets of up to RM5.2 billion. Liabilities made up of RM1.4 billion while Unit Holder’s Capital is RM3.8 billion. IGBREIT’s 2018 current ratio is 0.99. Gearing ratio stood at 23%, which is within the maximum 50% tolerance. 

Operating Cash Flow & Income Distribution

IGBREIT’s operating cash flow is on an uptrend, meaning year by year it is bringing in more and more cash. The income distribution to unitholders is also increasing in tandem.

Future Growth

Ever since IPO, IGBREIT has always maintained its investment property to only 2 units. Compare to other mall REITs, IGBREIT has the least units. But this is a rare scenario where less is more. Even with 2 investment properties, IGBREIT has been able to increase its top line and bottom line. Situated in the strategic region of Klang Valley enables it to pull in shoppers and foot traffic.

On top of ongoing Asset Enhancement Initiatives (AEI), net lettable area for both Mid Valley Megamall and The Gardens Mall have seen increase year on year.

Last but not least, Mid Valley Southkey has started operating in the state of Johor, under the ownership IGB BHD, IGBREIT’s parent company. There could be a potential where IGB BHD may inject Mid Valley Southkey into IGBREIT.

Price

MyKayaPlus Verdict

Although not actively looking for properties to buy and sell, IGBREIT shows that being active in buying and selling assets is not always the best way in creating value. Ever since its IPO until now, IGBREIT which owns 2 shopping malls located in the most ideal location in Kuala Lumpur has proven to be able to grow its rental income year after year, hence rewarding its shareholders handsomely. 

However, we do notice the price has been running up a bit too much as of lately. As much as IGB REIT as proven itself to be a valuable REIT to build an investment portfolio, do note that buying a REIT at a higher price also will mean getting a lower distribution yield %.

 

DISCLAIMER
The information available in this article/report/analysis is for sharing and education purposes only. This is neither a recommendation to purchase or sell any of the shares, securities or other instruments mentioned; nor can it be treated as professional advice to buy, sell or take a position in any shares, securities or other instruments. If you need specific investment advice, please consult the relevant professional investment advice and/or for study or research only.
No warranty is made with respect to the accuracy, adequacy, reliability, suitability, applicability, or completeness of the information contained. The author disclaims any reward or responsibility for any gains or losses arising from direct and indirect use & application of any contents of the article/report/written material

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