KUALA LUMPUR: RHB Research Institute has initiated coverage on IGB REIT, which will be listed on Friday, with an Outperform call and a DDM-based fair value of RM1.43, based on a cost of equity assumption of 7%. The offer price is RM1.25.
It said IGB REIT, with its two assets Mid Valley Megamall (worth RM3.44bn) and The Gardens Mall (RM1.16bn) will be the largest pure retail REIT thus far, ahead of Pavilion REIT and Sunway REIT. “We believe that The Gardens Mall (TGM) will be the REIT's future growth driver. TGM currently contributes about 30% to IGB REIT's topline. TGM is a high-end mall and in the early stages of its rental cycle as compared to the more matured Mid Valley Megamall (MVM),” it said. RHB Research said other factors that could potentially drive IGB REIT's growth going forward include: 1) Strength of the management team; 2) Proactive asset enhancement initiatives; 3) Potential development of the surrounding areas; and 4) Resilient consumer spending. “We forecast an EPU growth of about 6%-7% per annum for IGB REIT, on the back of our rental growth assumption of 5%-6% per annum for MVM and 7%-9% per annum for TGM,” it said.
By The Star