IGB REIT's malls are valued at a whopping RM 1,815 per sq ft, IGB Corp to gain from RM 1.05 Billion revaluation surplus and RM 951 Million cash payoff - CIMB Research

(IGB opening stock price today (21.5.2012) was RM 2.71)

IGB Corps net profit of RM57.4mil for the first quarter ended March 31 was in line with our and streets estimates, covering about 28% of full-year numbers.

As expected, no interim dividend was declared. Its core earnings showed a strong recovery quarter-on-quarter, following a one-off provision of RM40mil for MidValley Citys infrastructure cost in the preceding quarter and more meaningful progress billings from ongoing developments, such as Seri Ampang Hilir (gross development value of RM90mil) and Manor Park in Sungai Buloh.

The groups earnings may be stronger in the second half of the year, in view of the potentially stronger billings in the coming quarters.

As expected, the property investment unit remained as the major contributor, which saw its earnings before interest and tax (EBIT) growing by 53% quarter-on-quarter due to recent renewals at Gardens Mall about 60% of the net lettable area.

Likewise, there was a healthy growth of 48% year-on-year due to a strong all-round performance, especially at its hotel division EBIT grew by over 50% due to better average room rate and occupancy rates.

Moving forward, IGB will benefit handsomely from the listing of its two malls MidValley Megamall and Gardens Mall via an establishment of a real estate investment trust (REIT).

The malls are valued at RM4.6bil or at a whopping RM1,815 per sq ft, and would result in a revaluation gain of RM1.3bil to KrisAssets or RM992mil (or 67 sen per share accretion) to IGB.

There will be a special dividend and capital repayment amounting to RM1.27bil, which translates into an attractive RM2.88 per share.

Based on IGBs 75% stake, the company stands to get a handsome cash payoff of RM951mil or 64 sen per share.

There is a further revaluation surplus of RM1.05bil in IGBs under-appreciated portfolio of well-occupied office buildings (2.2 million sq ft), which are carried in its book at low historical costs.

We believe the office REIT will be launched next year once the retail REIT listing is done.

A hospitality REIT for its hotel assets would complete the re-pricing of its assets, transforming IGB into an asset-light fee-based entity with controlling stakes in three listed asset-specific REITs.

IGB rose by close to 20% after our upgrade in January but has been hovering at RM2.75 to RM2.80 per share over the past two months, given the weak sentiment in the market.

We expect the stock to trade at a narrower discount, now at about 39%, given the good valuation for its prime assets.

Source: www.thestar.com.my

IGB REIT IPO Update: KrisAssets to distribute 2.73 billion units in IGB REIT and pay out RM 1.27 billion cash to existing shareholders, IGB to be entitled for RM 965 million cash

(IGB closing stock price yesterday (15.5.2012) was RM 2.76)

(KASSETS closing stock price yesterday (15.5.2012) was RM 7.40)

IGB Corp Bhd stands to rake in close to RM1 billion in cash as its 76%-owned subsidiary KrisAssets Holdings Bhd plans to distribute cash proceeds from the planned disposal of its two retail properties to a real estate investment trust (REIT).

KrisAssets said last Friday it plans to dispose of the Mid Valley Megamall and The Gardens Mall here to IGB REIT for RM4.61 billion. The transaction will be satisfied by the issuance of 3.4 billion new units in IGB REIT at RM1 each while the balance of RM1.21 billion will be settled in cash, to be funded from the drawdown of a portion of syndicated financing facilities by the REIT.

According to KrisAssets’ announcement to the exchange, it plans to distribute to its shareholders 2.73 billion units out of the 3.4 billion units in IGB REIT under a distribution-in-specie exercise, and pay out some RM1.27 billion cash to shareholders, of which IGB is entitled to about RM965 million with its 76% stake. KrisAssets will place out the remaining 670 million units in the REIT to raise some RM670 million for the repayment of its own borrowings and liabilities.

The cash payout by KrisAssets will further expand IGB’s huge cash reserves. As at Dec 31, 2011, IGB had cash of RM821.42 million against debt obligations of RM1.1 billion. Including the potential cash distribution of RM965 million from KrisAssets, IGB’s cash pile is expected to grow to RM1.79 billion, placing the parent company at a net cash position of RM690 million.

But although IGB will see its cash pile swelling, analysts said the group needs to strike a “delicate balance” between making a special dividend payout and reinvesting the cash in its real estate development projects abroad.

“As we have highlighted earlier, IGB is exploring development opportunities in London and Taipei, whereby we understand that IGB would require about RM1 billion to fund the acquisition of a site in London,” AmResearch wrote in a note yesterday.

For FY11 ended Dec 31, IGB’s net profit rose 4% to RM237.65 million from RM174.62 million a year ago, as revenue grew 7% to RM772.13 million from RM719.36 million previously. The anticipation of further net profit and revenue growth in IGB has lifted analysts’ expectation of a potential upside in its stock price.

AmResearch has a target price of RM3.50 for IGB, translating into a discount of 22% to the research firm’s revised net asset value of RM4.50 a share for the stock.

IGB rose 2.2% or six sen to close at RM2.80 yesterday with some 2.7 million shares done. KrisAssets, buoyed by news of the proposed cash payout, rose 49 sen to end at RM7.50, leading Bursa Malaysia’s top gainers’ list.

Source: www.theedgemalaysia.com

IGB REIT IPO Update: KrisAssets Holdings announced proposed disposal of its Mid Valley Megamall, The Gardens Mall and related assets for RM4.6 Billion to its IGB REIT subsidiary

(IGB opening stock price today (12.5.2012) was RM 2.74)

IGB Corporation Bhd's unit, KrisAssets Holdings Bhd, has announced the proposed disposal by the wholly-owned subsidiaries of KrisAssets of Mid Valley Megamall, Mid Valley Megamall Related Assets, The Gardens Mall and The Gardens Related Assets, for a total disposal consideration of RM4,612.6 million.

It is to be satisfied via the proposed issuance of 3,400 million units in IGB REIT and the balance in cash, KrisAssets said in its filing to Bursa today.

It was reported earlier that KrisAssets has proposed to establish a real estate investment trust (REIT) comprising two shopping malls, The Gardens Mall and Mid Valley Megamall, which will be listed on Bursa.

KrisAssets also announced an offer for sale by Mid Valley City Gardens Sdn Bhd of 670 million Consideration Units, via an initial public offering pursuant to the Proposed Listing (Proposed Offer for Sale).

There will also be a proposed distribution by KrisAssets of 2,730 million Consideration Units and the remaining cash proceeds from the Proposed Disposal and the Proposed Offer for Sale to the entitled shareholders of KrisAssets at an entitlement date to be determined later.

Following the completion of the Proposed Disposal, KrisAssets will be a company without any business or operations. Bernama

Source: www.btimes.com.my

IGB planning two more REITs?

(IGB opening stock price today (23.4.2012) was RM 2.80)

IGB Corp Bhd is said to be mulling over another two real estate investment trusts (REITs) to unlock the value of its office and hotel assets after the company announced plans last week to establish and list a retail REIT on Bursa Malaysia.

An analyst with a bank-backed brokerage said IGB's management was looking at the possibility of launching an office REIT after the debut of its retail REIT, to be followed by a hotel REIT after that.

“Such plans would crystallise the deeply embedded value of its office and hotel assets,” he told StarBiz.

The listing of IGB's maiden REIT, the retail REIT, around the third or fourth quarter of this year is to unlock the value of its two prime retail assets Mid Valley Megamall and The Gardens Mall.

Both the malls are currently parked under IGB's 75%-owned unit, KrisAssets Holdings Bhd.

Mid Valley Megamall has a net lettable area (NLA) of 1.77 million sq ft and The Gardens has 820,000 sq ft. The two retail assets have an estimated total asset value of close to RM4bil.

In the hospitality sector, IGB owns 16 hotel assets in Malaysia and seven overseas. It is also said to be building two new hotels in Penang.

As for its office portfolio, IGB owns seven office buildings with total NLA of 2.2 million sq ft. Of its office portfolio, five are in Mid Valley City in Kuala Lumpur where its two retail malls are also located.

The buildings are Menara IGB with NLA of 251,751 sq ft; Centrepoint South (233,804 sq ft); Centrepoint North (231,115 sq ft); Gardens North Tower (426,870 sq ft); and Gardens South Tower (408,314 sq ft).

The other two buildings in the city are Menara Tan & Tan with NLA of 340,596 sq ft and Plaza Permata with 190,511 sq ft.

The analyst said Mid Valley City's office market remained strong, in-line with the strong demand for suburban office space.

“The strong rental demand could be attributed to the rising maturity of the area, easy accessibility as well as the appeal of Mid Valley MegaMall and Gardens Mall,” he added.

The most recently completed office buildings Gardens South and North Tower enjoy occupancy rates at over 90% respectively. They command average rental rates of RM6 per sq ft (psf) to RM6.50 psf; comparable to buildings in Kuala Lumpur city centre.

Menara IGB, Centrepoint North and Centrepoint South towers have occupancy rates of 96% to 100%, but their rental rates are slightly lower at RM4.20 psf to RM5 psf given that these are not new buildings.

The group's two other office buildings Menara Tan & Tan and Plaza Permata in the city continue to deliver occupancy rates in excess of 85%.

A recent research note on IGB from a local brokerage said IGB's under-appreciated portfolio of office buildings would be able to provide significant valuation kicker to the group.

“IGB's portfolio of office buildings are all carried in its book at historical costs of just RM550mil versus our estimated market value of RM1.61bil.

“The Gardens North Tower is carried in its book at just RM140mil or RM329 psf, while Gardens South Tower is at RM136.9mil or RM335 psf.

“This is despite both buildings enjoying excellent prime rentals of RM6-6.50 psf. Based on capitalisation rates of between 6%-7%, the potential revaluation surplus is estimated to be about RM1.05bil, representing almost 70 sen/share (or 28% of IGB's current market capitalisation),” the report added.

Source: www.thestar.com.my