Property | REITS
IGB REIT: Taking a Breather; D/G To NEUTRAL
- D/G to NEUTRAL from Buy, with unchanged TP of MYR2.60, 5% downside. IGB REIT’s 1H25 results were within expectations. We downgrade the stock as we believe the current yield spread of 150bps – following the recent share price rally – has largely priced in the inorganic growth prospect of the upcoming Southkey Megamall acquisition. Additionally, its fully fixed-rate debt structure limits any potential upside from the recent policy rate cut, unlike other REITs with higher floating-rate exposure. This report marks the transfer of coverage to Tai Yu Jie.
- Within expectations. 1H25 core profit of MYR208.9m (+9.5% YoY) met 52% and 51% of our and Street’s full-year estimates. 2Q25 DPU was 2.8 sen (2Q24: 2.6 sen), bringing 1H25 DPU to 6.0 sen (1H24: 5.5 sen). 2Q25 gearing stood at 16.4% (2Q24: 17.3%).
- Results review. YoY, 1H25 revenue rose 6.1% to MYR331.5m, driven by solid rental reversion from a lower base as the REIT was undergoing a major reconfiguration in the previous year. 1H25 NPI margin expanded by 1.5ppts to 76.3%, supported by operating leverage from higher revenue. QoQ, 2Q25 revenue fell 6.6% to MYR160.1m due to softer seasonality in the absence of festive periods. Consequently, 2Q25 core profit fell 11.6% QoQ to MYR97.8m.
- Outlook. We expect sequential retail sales (with turnover rent accounting for 12-15% of rental income) to remain seasonally soft due to the absence of festive periods in 3Q25, although this should be partially mitigated by the recently announced additional public holiday in September and continuous government measures to support consumer spending. Beyond the immediate term, management is guiding for mid-single-digit rental reversions, considering its robust tenant demand and full occupancy at both Mid Valley Megamall and The Gardens Mall. Additionally, the reconfiguration of space previously occupied by an anchor tenant into multiple smaller specialty lots – which typically command higher average rental rates – is expected to be fully reflected in FY25F. Its strong bargaining power should, in our view, enable the REIT to pass through the latest SST rate increase to tenants. Meanwhile, the acquisition of Southkey Megamall – expected to be completed by 4Q25 – should drive meaningful inorganic growth (FY26F: +19.1%) while also allowing the REIT to tap into strong spending power from Singaporean shoppers.
- Forecast and ratings. Post results, we maintain our earnings forecasts and DDM-derived MYR2.60 TP (includes a 0% ESG premium/discount). Our TP implies an FY26F yield of 5.2%, offering a spread of 180bps over the 10-year Malaysian Government Bond yield. Key risks: Lower/higher-than-expected rental reversions, economic growth, and occupancy rates.
Forecasts and Valuation
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total turnover (MYRm) | 604 | 626 | 665 | 976 | 1,011 |
| Net property income (MYRm) | 448 | 456 | 488 | 702 | 728 |
| Reported net profit (MYRm) | 359 | 369 | 399 | 568 | 589 |
| Total distributable income (MYRm) | 386 | 396 | 427 | 596 | 618 |
| DPS (MYR) | 0.10 | 0.11 | 0.12 | 0.13 | 0.14 |
| DPS growth (%) | 6.0 | 2.2 | 7.6 | 16.9 | 3.4 |
| P/B (x) | 2.44 | 2.33 | 2.34 | 2.02 | 2.03 |
| Dividend Yield (%) | 3.8 | 3.9 | 4.2 | 4.9 | 5.1 |
| Return on average equity (%) | 9.1 | 8.9 | 9.4 | 11.2 | 10.0 |
| Return on average assets (%) | 6.6 | 6.6 | 7.0 | 8.1 | 7.1 |
Overall ESG Score: 3.0 (out of 4)
E Score: 3.0 (GOOD)
S Score: 3.0 (GOOD)
G Score: 3.0 (GOOD)
Please refer to the ESG analysis on the next page.
Emissions And ESG
Trend analysis
Energy usage intensity has improved by 5.9% in 2024 compared to the 2019 baseline.
Emissions (tCO2e)
| Dec-22 | Dec-23 | Dec-24 | Dec-25 | |
|---|---|---|---|---|
| Scope 1 | – | 2,562 | 5,515 | – |
| Scope 2 | – | 46,015 | 47,005 | – |
| Scope 3 | – | 67,244 | 63,548 | – |
| Total emissions | na | 115,821 | 116,068 | na |
Latest ESG-Related Developments
Key initiatives include replacement of chillers and cooling towers in Mid Valley Megamall and The Gardens Mall to improve energy efficiency.
IGB REIT has also installed EV charging facilities in its malls to promote more sustainable transportation.
ESG Unbundled
Overall ESG Score: 3.0 (out of 4)
Last Updated: 23 April 2025
E Score: 3.0 (GOOD)
IGB REIT has made the conscious effort to reduce water consumption since the start of its sustainability reporting – in addition to identifying unaccounted water consumption. The REIT has also supported various tenants on responsible waste management and recycling initiatives.
S Score: 3.0 (GOOD)
Regular safety audits, trainings and inspections are conducted to ensure compliance with the Occupational Safety and Health Act. Cooperation with the Royal Malaysia Police to prevent terrorist threats is commendable. IGB REIT has also partnered with Teach for Malaysia or TFM to end education inequity.
G Score: 3.0 (GOOD)
The Corporate Governance framework (in line with the principles of the Malaysian Code on Corporate Governance) has laid out directors’ code of business conduct and ethics, and limits the tenure of its independent directors to nine years.
ESG Rating History
[ESG Rating History chart showing a consistent 3.0 score is presented here in the original report]
Financial Exhibits
Malaysia
Property
IGB REIT
IGBREIT MK
Neutral
Dividend discount model
The strong market positioning of Mid Valley Megamall and The Gardens Mall should provide stronger resistance against current headwinds.
Slower-than-expected economic recovery
IGB REIT is a retail-focused M-REIT. The REIT presently owns two of the largest malls in the Klang Valley outside of the Golden Triangle area, i.e. Mid Valley Megamall and The Gardens Mall.
Financial summary
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring EPS (MYR) | 0.10 | 0.10 | 0.11 | 0.13 | 0.14 |
| EPS (MYR) | 0.10 | 0.10 | 0.11 | 0.13 | 0.14 |
| DPS (MYR) | 0.10 | 0.11 | 0.12 | 0.13 | 0.14 |
| BVPS (MYR) | 1.12 | 1.18 | 1.17 | 1.36 | 1.35 |
| Return on average equity (%) | 9.1 | 8.9 | 9.4 | 11.2 | 10.0 |
| Weighted avg adjusted shares (m) | 3,601.64 | 3,615.39 | 3,622.62 | 4,328.86 | 4,337.52 |
Valuation metrics
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring P/E (x) | 27.48 | 26.87 | 24.88 | 20.89 | 20.18 |
| P/E (x) | 27.48 | 26.87 | 24.88 | 20.89 | 20.18 |
| P/B (x) | 2.4 | 2.3 | 2.3 | 2.0 | 2.0 |
| FCF Yield (%) | 5.8 | 6.4 | 4.5 | 5.6 | 5.8 |
| Dividend Yield (%) | 3.8 | 3.9 | 4.2 | 4.9 | 5.1 |
| EV/EBITDA (x) | (4.59) | (4.33) | (4.06) | (3.75) | (3.68) |
| EV/EBIT (x) | (4.59) | (4.33) | (4.06) | (3.75) | (3.68) |
Income statement (MYRm)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total turnover | 604 | 626 | 665 | 976 | 1,011 |
| EBITDA | 408 | 414 | 445 | 658 | 681 |
| Operating profit | 408 | 414 | 445 | 658 | 681 |
| Net interest | (49) | (45) | (46) | (90) | (92) |
| Pre-tax profit | 359 | 369 | 399 | 568 | 589 |
| Recurring net profit | 359 | 369 | 399 | 568 | 589 |
Cash flow (MYRm)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Change in working capital | 10 | 10 | 11 | 11 | 12 |
| Cash flow from operations | 586 | 645 | 466 | 680 | 705 |
| Capex | (15) | (15) | (15) | (15) | (15) |
| Cash flow from investing activities | (166) | (250) | 0 | (2,650) | 0 |
| Dividends paid | (377) | (387) | (417) | (583) | (604) |
| Cash flow from financing activities | (257) | (210) | (478) | 314 | (709) |
| Cash at beginning of period | 258 | 274 | 258 | 216 | 210 |
| Net change in cash | 163 | 185 | (12) | (1,656) | (4) |
| Ending balance cash | 421 | 459 | 247 | (1,440) | 206 |
Balance sheet (MYRm)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total cash and equivalents | 274 | 258 | 216 | 210 | 206 |
| Tangible fixed assets | 2 | 2 | 2 | 2 | 2 |
| Total investments | 5,186 | 5,436 | 5,436 | 8,086 | 8,086 |
| Total assets | 5,505 | 5,741 | 5,723 | 8,359 | 8,344 |
| Short-term debt | 15 | 15 | 15 | 15 | 15 |
| Total long-term debt | 1,199 | 1,200 | 1,200 | 2,200 | 2,200 |
| Total liabilities | 1,468 | 1,486 | 1,486 | 2,486 | 2,486 |
| Shareholders’ equity | 4,037 | 4,255 | 4,238 | 5,873 | 5,859 |
| Total equity | 4,037 | 4,255 | 4,238 | 5,873 | 5,859 |
| Net debt | 941 | 957 | 999 | 2,005 | 2,009 |
| Total liabilities & equity | 5,505 | 5,741 | 5,723 | 8,359 | 8,344 |
Key metrics
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Revenue growth (%) | 8.6 | 3.6 | 6.3 | 46.7 | 3.6 |
| Recurrent EPS growth (%) | 6.2 | 2.3 | 8.0 | 19.1 | 3.5 |
| Operating EBITDA margin (%) | 67.5 | 66.1 | 66.9 | 67.4 | 67.4 |
| Net profit margin (%) | 59.4 | 58.9 | 60.0 | 58.2 | 58.3 |
| Dividend payout ratio (%) | 105.0 | 104.9 | 104.5 | 102.6 | 102.5 |
| Capex/sales (%) | 2.5 | 2.4 | 2.3 | 1.5 | 1.5 |
| Interest cover (x) | 7.54 | 7.64 | 8.33 | 6.75 | 6.84 |
Results At a Glance
| FYE Dec (MYRm) | 2Q24 | 1Q25 | 2Q25 | QoQ (%) | YoY (%) | 1H24 | 1H25 | YoY (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 150.0 | 171.4 | 160.1 | (6.6) | 6.8 | 312.5 | 331.5 | 6.1 | Higher revenue YoY from higher rental and occupancy rates from a major reconfiguration done in 2024 |
| Net property income (NPI) | 109.5 | 133.1 | 119.9 | (10.0) | 9.5 | 233.7 | 253.0 | 8.2 | Lower maintenance, utilities, and reimbursement costs led to higher NPI margins |
| Interest expense | (13.5) | (13.3) | (13.5) | 1.1 | 0.0 | (26.9) | (26.8) | (0.5) | 100% borrowings on fixed rate |
| Interest income | 2.1 | 2.1 | 2.1 | 2.2 | (0.8) | 4.4 | 4.2 | (4.8) | |
| ΕΙ | (6.6) | (4.0) | (5.3) | 31.7 | (19.6) | (9.3) | (9.4) | 0.1 | Change in fair value of properties |
| Others | (0.3) | (0.1) | (0.5) | >100 | 45.3 | (0.3) | (0.1) | (75.2) | |
| Pretax profit | 81.5 | 106.6 | 92.5 | (13.2) | 13.4 | 181.5 | 199.6 | 10.0 | |
| Tax | 0.0 | 0.0 | 0.0 | nm | nm | 0.0 | 0.0 | nm | |
| Minority Interest | 0.0 | 0.0 | 0.0 | nm | nm | 0.0 | 0.0 | nm | |
| Net Profit | 81.5 | 106.6 | 92.5 | (13.2) | 13.4 | 181.5 | 199.6 | 10.0 | |
| Core Profit | 88.2 | 110.6 | 97.8 | (11.6) | 11.0 | 190.9 | 208.9 | 9.5 | In line with expectations |
| Core Earnings Per Unit (sen) | 2.44 | 3.06 | 2.70 | (11.6) | 10.7 | 5.28 | 5.76 | 9.0 | |
| Dividends Per Unit (sen) | 2.56 | 3.19 | 2.82 | (11.6) | 10.2 | 5.52 | 6.01 | 8.9 | |
| NPI Margin (%) | 73.0 | 77.6 | 74.9 | 74.8 | 76.3 | ||||
| Pretax Margin (%) | 54.4 | 62.2 | 57.8 | 58.1 | 60.2 |
Recommendation Chart
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-06-25 | Buy | 2.60 | 2.49 |
| 2025-04-24 | Neutral | 2.19 | 2.29 |
| 2025-01-24 | Neutral | 2.19 | 2.17 |
| 2024-10-29 | Neutral | 2.12 | 2.11 |
| 2024-07-26 | Neutral | 2.12 | 1.96 |
| 2024-04-18 | Buy | 2.03 | 1.79 |
| 2024-01-31 | Buy | 1.98 | 1.76 |
| 2023-10-16 | Buy | 1.93 | 1.71 |
| 2023-07-27 | Buy | 1.91 | 1.65 |
| 2023-07-03 | Buy | 1.91 | 1.66 |
| 2023-04-28 | Neutral | 1.88 | 1.75 |
| 2023-01-20 | Neutral | 1.85 | 1.75 |
| 2022-11-04 | Buy | 1.85 | 1.58 |
| 2022-07-28 | Buy | 1.85 | 1.64 |
| 2022-04-28 | Buy | 1.92 | 1.64 |
Disclosures and Disclaimers
This report is prepared for information purposes only. It is intended for circulation amongst RHB and its affiliates’ clients generally or such persons as may be permitted by applicable law. The information contained herein is not reproduced or redistributed to any other person or persons, in whole or in part, for any purpose whatsoever. All opinions and estimates expressed herein are subject to change without notice. RHB assumes no responsibility or liability whatsoever for the integrity, completeness, and accuracy of the information and contents of this report. Investors should make their own independent evaluation of the information contained herein, consider their own investment objective, financial situation and particular needs and seek their own financial, business, legal, tax and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Analyst Certification
The analyst(s) who prepared this report, and their associates hereby, certify that: (1) they do not have any financial interest in the securities or other capital market products of the subject companies mentioned in this report, except for: [No exceptions listed]. (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
