After 22% rally this year, analysts downgrade IGB REIT to ‘hold’

• IGB REIT’s valuation appears stretched after this year’s rally, AmInvest said, at just under two times net asset value compared with peers like Sunway REIT and Pavilion REIT at slightly over one time NAV.

KUALA LUMPUR (Oct 29): The 22% rally in the unit price of IGB REIT since the start of the year has prompted analysts to downgrade the counter to “hold”, even after ascribing slightly higher fair value on the Mid Valley Megamall operator.

IGB REIT’s valuation appears stretched after this year’s rally, AmInvest said, at just under two times net asset value compared with peers like Sunway REIT and Pavilion REIT at slightly over one time NAV.

Maybank IB, separately cited “limited upside potential” on the stock, but noted it had not inputted additional assets into its forecasts.

“We anticipate IGB REIT’s next major growth catalyst to be the acquisition of Mid Valley Southkey Mall in Johor Bahru from its sponsor, IGB Corp Bhd,” it said.

AmInvest has raised the fair value on IGB REIT to RM2.28, from RM2.11, on the back of lower cost of capital assumption. Maybank IB separately values the REIT at RM2.22, up from RM2.15 previously, as it rolled forward its valuation years.

IGB REIT also operates The Gardens Mall adjacent to Mid Valley — both of which saw average gross monthly rental income rising 13.5% and 1.4% year-on-year in the latest quarter ended Sept 30 (4QFY2024), Maybank IB said.

The Mid Valley Southkey Mall, which is fully occupied, will see rental renewal in 2025, the research house added.

IGB REIT units fell seven sen or 3.21% on Tuesday to close at RM2.11, valuing the REIT at RM7.62 billion and providing a historical dividend yield of 4.96%. The counter is up over 22% this year.

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