KUALA LUMPUR (Jan 29): HwangDBS Vickers Research Sdn Bhd (HDBSVR) said that the higher assessment tax and electricity tariffs will impact IGB Real Estate Investment Trust Bhd’s (IGB Reit) growth for FY14 and FY15.

The research house said in a note today that its preliminary estimates suggest a 5% and 9% downside for the income for FY14 and FY15 respectively.

“The REIT will be impacted by higher assessment tax and electricity tariffs, although this could be passed on through higher service charges and rental reversions,” said HDBSVR.

However, rents are expected to remain resilient due to the prime location of the REIT’s assets near large catchment areas and an office belt, with Gardens Mall being the key growth driver for the group due to its low rental base of less than RM10 psf.

“This is still at substantial discounts to Pavilion KL and Suria KLCC rents at RM21 psf and RM25 psf respectively,” said the research house.

It added that Mid Valley Megamall will remain a major contributor to the group’s cash flow.

Yesterday, IGB REIT had released its 4QFY13 results, reporting a 7.6% year-on-year (y-o-y) rise in net profit for the quarter to RM158.08 million, while revenue rose 11.0% to RM114.32 million, which was in line with the research house’s forecasts.

HDBSVR maintains a “hold” call on IGB REIT at RM1.17, with a target price of RM1.35.