KUALA LUMPUR (Jan 24): Units of IGB Real Estate Investment Trust (KL:IGBREIT) will likely have little upside ahead following the recent rally, analysts said, after ending 2024 with earnings which were slightly below expected.

One research house, JPMorgan, downgraded the stock to 'hold'. The consensus now calls for core net income of RM405 million and dividends per share of 11 sen for the financial year ending Dec 31, 2025. After stripping out one-off items, net income of RM369 million in 2024 was about 4% below the consensus estimate.

“We see a stable earnings outlook for IGB REIT, which will be supported by rental growth for Mid Valley Megamall and The Gardens Mall,” said MIDF Amanah Investment Bank, noting that occupancy rates of the two malls remain encouraging due to high shopper footfall and their strategic locations.

However, “we see that the positives are largely priced in, while the share price upside is limited”, the house added.

IGB REIT rallied about 33% on Bursa Malaysia last year, thanks to the near full occupancy and rising footfall, which helped its two flagship shopping malls to command higher reversions — an increase in rental rates on lease renewals. The fourth quarter however turned out weaker due to maintenance and upgrading works.

There are only two ‘buy’ calls out of 12 research houses covering the stock. The majority are on ‘hold’ recommendations, and there is no ‘sell’. The average target price is RM2.22, according to Bloomberg, which implies a potential return of less than 2% in the next 12 months.

There has been no formal announcement on the much-awaited potential injection of Mid Valley Southkey megamall into the REIT, AmInvestment Bank noted. “Until then, we see limited increase in distribution yield,” the house said.

CIMB Securities, one of the research houses with a ‘buy’ call, said IGB REIT’s earnings would pick up in 2025, supported by full-year contributions from the refurbished areas of Mid Valley Megamall and The Garden Malls as well as mid-single-digit rental reversions.

The first half of 2025 is also expected to be stronger for IGB REIT, thanks to various festive activities, the house flagged, adding that its price is backed by a dividend yield of 5.2%-5.9% for the next two years. Total distribution per share for 2024 stood at 10.7 sen.

For the fourth quarter ended Dec 31, 2024, IGB REIT recorded a 6.4% year-on-year decline in net property income, due to maintenance costs for mechanical and electrical equipment, upgrading and restoration works, and marketing expenses.

Net profit for the quarter meanwhile came in at RM85.5 million, while revenue was a tad lower at RM158.3 million.

At the time of writing on Friday, units of IGB REIT were down by two sen or 0.91% to RM2.17, giving the REIT a market capitalisation of RM7.85 billion.

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