Stock Name: IGB
Company Name: IGB CORPORATION BHD
Research House: AMMB
IGB Corporation Bhd
(March 30, RM1.89)
Downgrade to hold at RM1.93, fair value cut to RM2.20: We have downgraded IGB from buy to hold and cut our fair value to RM2.20 from RM2.80 based on a 45% (previously 30%) discount to our net asset value (NAV) estimate of RM4. Historically, IGB has traded at 50% discount to its NAV. Following our company visit, we understand that there will only be two residential launches this year, with an estimated gross development value (GDV) of RM140 million, down from our earlier expectation of around RM400 million-RM500 million in new launches. Final phase development of MidValley City remains status quo. Residential launches for this year are Seri Ampang Hilir low-rise condo units; (GDV: RM50 million) and Pandan mixed commercial (GDV: RM90 million). We had expected IGB to launch more residential projects, like 6 Stonor (estimated GDV: RM300 million) and more developments at Sierramas. The last phase of Mid Valley will be made up of two blocks of office towers (GDV: RM1billion) with saleable area of 600,000sf. Given the never-ending approval issues, management only expects to launch in FY2012. Our rating downgrade is further strengthened by the fact that the group is now less keen to monetise its assets via a REIT. This is because the group has a view that the restructuring of assets will not provide sufficient value to the group and shareholders. Nonetheless, IGB's property investments would continue to drive earnings with new properties stabilising. Occupancy at Gardens office towers is expected to strengthen to 90%- 100% by year-end from 50%-70% currently. We are expecting a solid rent reversal of circa 5% as well at Mid Valley Megamall in tandem with stronger consumer sentiment. We have slashed our earnings estimates for FY10-FY12 by 6%-11% to RM165 million to RM197 million due to the lower-than-expected pre-sales. Our earnings estimates will be driven by expected growth in income from IGB's assets at Mid Valley City. Despite its current valuation at 52% discount to NAV, which appears attractive, the slowdown in new residential presales and uncertainty in asset monetisation means IGB might lag leading property stocks such as IJM Land and S P Setia. - AmResearch, March 30
This article appeared in The Edge Financial Daily, March 31, 2010.
Company Name: IGB CORPORATION BHD
Research House: AMMB
IGB Corporation Bhd
(March 30, RM1.89)
Downgrade to hold at RM1.93, fair value cut to RM2.20: We have downgraded IGB from buy to hold and cut our fair value to RM2.20 from RM2.80 based on a 45% (previously 30%) discount to our net asset value (NAV) estimate of RM4. Historically, IGB has traded at 50% discount to its NAV. Following our company visit, we understand that there will only be two residential launches this year, with an estimated gross development value (GDV) of RM140 million, down from our earlier expectation of around RM400 million-RM500 million in new launches. Final phase development of MidValley City remains status quo. Residential launches for this year are Seri Ampang Hilir low-rise condo units; (GDV: RM50 million) and Pandan mixed commercial (GDV: RM90 million). We had expected IGB to launch more residential projects, like 6 Stonor (estimated GDV: RM300 million) and more developments at Sierramas. The last phase of Mid Valley will be made up of two blocks of office towers (GDV: RM1billion) with saleable area of 600,000sf. Given the never-ending approval issues, management only expects to launch in FY2012. Our rating downgrade is further strengthened by the fact that the group is now less keen to monetise its assets via a REIT. This is because the group has a view that the restructuring of assets will not provide sufficient value to the group and shareholders. Nonetheless, IGB's property investments would continue to drive earnings with new properties stabilising. Occupancy at Gardens office towers is expected to strengthen to 90%- 100% by year-end from 50%-70% currently. We are expecting a solid rent reversal of circa 5% as well at Mid Valley Megamall in tandem with stronger consumer sentiment. We have slashed our earnings estimates for FY10-FY12 by 6%-11% to RM165 million to RM197 million due to the lower-than-expected pre-sales. Our earnings estimates will be driven by expected growth in income from IGB's assets at Mid Valley City. Despite its current valuation at 52% discount to NAV, which appears attractive, the slowdown in new residential presales and uncertainty in asset monetisation means IGB might lag leading property stocks such as IJM Land and S P Setia. - AmResearch, March 30
This article appeared in The Edge Financial Daily, March 31, 2010.
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