- IGB reported a net profit of RM37.5mil in 3QFY12, bringing
its cumulative 9MFY12 earnings to RM151mil. This is broadly in-line with our
and consensus expectations, accounting for 73% and 71% of FY12F estimates.
- Earnings jumped by a tad 4% YoY despite recording a
healthy revenue growth of 35%. Few factors can explain this:- (1) one-off accrual expenses amounting to
RM28.7mil relating to the listing of IGB REIT and (2) higher-than-expected tax
rate 39.6%. On the other hand, earnings fell 33% QoQ on the back of an 8% drop
in revenue which was mainly due to the one-off costs relating to IGB REIT.
- However, the property development division was the star of
the show, recording a strong growth in operating profit both YoY and QoQ – albeit
coming from a low base and partly because of a write-back amounting to RM10mil
relating to its land in Labu . Having said that, the strong progress billings
came from its latest project called the G Residence in Pandan.
- We gather that the take-up rate has reached about 90% from
about 70% previously. We expect some decent numbers again for the division in
the final quarter as both Garden Manor and Seri Ampang Hilir are at the peak of
construction works.
- Similarly, the hotel division’s operating profit jumped
50% YoY mainly due to the full recognition of Renaissance Hotel which was
recently fully-owned by the group. On
the flipside, all the office buildings within Mid-Valley are fully occupied at
an average rental of RM6.50psf– including Gardens North and South Tower which
previously experienced slow occupancy growth.
- We reaffirm our BUY rating on IGB Corporation with our
fair value unchanged at RM3.20/share, a 30% discount to its estimated NAV of
RM4.60/share. IGB is currently trading at a steep 45% discount to its estimated
NAV. We believe the stock would continue to trade within this range amid the
uncertainty over the distribution of special dividends. We continue to like the
company due to its solid earnings, upside from the potential ‘REIT-ing’ of its
office assets and attractive valuations.
- We believe management ought to engage in a more active
capital management exercise. We believe special dividend is now the primary
re-rating catalyst for the stock. However, our recent talks with management
indicate that special dividends remain
uncertain at this juncture.
No comments:
Post a Comment