IGBCR: REIT Maintains Strong Performance, Target Price Reaffirmed Amidst Market Challenges

IGB Commercial REIT (IGBCR) announced its third-quarter 2025 results, which were largely in line with market expectations, showcasing steady top-line growth and resilient net property income (NPI) margins. The REIT’s solid performance was primarily driven by strategic cost efficiencies and improved occupancy across its key assets, despite a challenging broader office market.

Performance Review

For the first nine months of 2025 (9M25), IGBCR reported a core profit of MYR71.5 million, marking a significant 26.1% year-on-year increase and meeting 78% of the full-year estimate. Quarterly performance saw a 3Q25 Distribution Per Unit (DPU) of 1 sen, up from 0.9 sen in 3Q24, bringing the 9M25 DPU to 3.1 sen (from 2.9 sen in 9M24). Revenue for 9M25 climbed 12% year-on-year to MYR191.1 million, a result of positive rental reversions and higher occupancy levels. The NPI margin remained stable at 60%, reflecting effective property management and operational efficiencies.

Portfolio occupancy saw a notable improvement to 92% in 3Q25, up from 87% in 3Q24, largely spurred by increased tenant intake at KL City assets. Key properties like Southpoint Tower maintained 100% tenancy, while GTower’s occupancy rose to 88%. Mid Valley assets continued to perform strongly, nearing full occupancy at approximately 96%. The REIT’s gearing remained healthy at 26.3% as of end-September 2025. While the broader office market faces headwinds due to oversupply and challenges in securing new tenants in some segments, IGBCR’s prime location assets continue to attract strong tenant demand, mitigating potential softer utilization in certain areas.

Future Outlook

The outlook for IGBCR remains positive, underpinned by the stability of its tenant base, with 76% of total net lettable area leases successfully renewed in 3Q25. Management’s strategy includes targeting more multi-national corporation (MNC) tenants to further boost occupancy in FY26. Rental reversion guidance is maintained at a low- to mid-single digit.

To enhance long-term tenant appeal and asset value, IGBCR is actively undertaking asset enhancement initiatives. These include CCTV and elevator upgrades, roof waterproofing, and office space refurbishments across its key properties. Despite these positive developments, potential risks remain, such as delays in securing new tenants for KL City assets and the broader economic slowdown.

Investment Recommendation

Given the robust operational performance and strategic asset management, TA SECURITIES has maintained a “BUY” recommendation for the REIT. The investment bank has set a target price of RM0.25, representing a 25.0% upside from its last traded price of RM0.20. This positive outlook is supported by strong tenant retention and ongoing asset enhancement initiatives, which are expected to bolster long-term tenant appeal and asset value.