IGB Corporation - Going ahead with REIT of MidValley retail assets BUY

Stock Name: IGB
Company Name: IGB CORPORATION BHD

Research House: AMMB

Price Call: BUY

Target Price: 3.50

- It was announced yesterday that IGB's 75%-owned, KrisAssetshas proposed to set up a retail REIT (IGB REIT), comprising its two valuableassets i.e. MidValley Megamall and MidValley Gardens. 

- We understand CIMB Investment Bank, Credit Suisse and HongLeong Investment Bank have been appointed as joint global coordinators andjoint book-runners for this proposed IPO. 

- Although not mentioned, we believe both assets would be ableto gain valuation of at least RM4bil or at a cap rate of 6%.

- As we have highlighted in our previous reports, the monetisationmove would unleash a significant revaluation surplus from assets re-pricing,and free up capital for redeployment. 

- The establishment of a REIT would optimise the ownership structureof its prime properties. This move, we believe, is triggered by the highimplied capital values evident in the recent listing of Pavilion REIT andCapitaMall Trust and a flat interest rate cycle. 

- IGB may rake in between RM465mil and RM1.4bil cash, dependingon its equity stake in the REIT. We would expect a special dividend and IGBwould deploy the freed capital to fund development projects overseas whereby itis looking at opportunities in London and Taiwan.

- There is a further RM1.05bil revaluation surplus in IGB's under-appreciatedportfolio of well-occupied office buildings (2.2msf), which are carried in itsbook at low historical costs. The retail REIT may be the trailblazer for IGB tolaunch an office REIT further out.  

- A hospitality REIT for its hotel assets would complete there-pricing of its assets, transforming IGB to an asset-light fee-based entitywith controlling stakes in three listed asset-specific REITs. 

- We maintain our BUY rating on IGB Corp with our fair valueunchanged at RM3.50/share based on a 22% discount to our NAV estimate ofRM4.50/share.

Source: AmeSecurities

IGB Corporation - MidValley City the sequel in Johor Bahru BUY

Stock Name: IGB
Company Name: IGB CORPORATION BHD

Research House: AMMB

Price Call: BUY

Target Price: 3.50

- IGB and Selia Pantai ' developer of SouthKey ' yesterday signeda conditional MoU to establish a 70:30 jointventure to co-develop 3 parcels ofleasehold land measuring 36acres within the SouthKey development. This is not asurprise given that IGB has indicated it has been looking for pockets of landin Johor for development.

- Selia Pantai is a public-private partnership between SeliaGroup and the Johor State Government via its arm, Kumpulan Prasarana RakyatJohor (KPRJ).

- The JV intends to co-develop a megamall and possibly othercommercial/residential properties including hotel, serviced apartments andoffices. We note that the megamall would have an NLA of circa 1.5mil sf 'almost as big as MidValley MegaMall -with close to 7,000 parking bays. 

- To recap, SouthKey is a mixed commercial development spanningover 300 acres within Permas Jaya which enjoys frontage of Jalan Tebrau, JalanBakar Batu as well as the recently-completed Eastern Dispersal Link. It is locatedjust five minutes away from Sultan Iskandar Customs, Immigration and Quarantine(CIQ) complex.

- We view this positively because:- (1) we believe the mall wouldbe a success given the area's sizeable catchment population of more than120,000 and the lack of quality malls within it. 

- At present, the total NLA in Johor Bahru is estimated to beat 11.6 million sf with an average occupancy rate in excess of 80%.  In the pipeline includes a lifestyle mall (GFA:1mil sf) by Iskandar Investment Bhd located at Medini North and theredevelopment of Komtar retail mall (GFA: 0.4mil sf) in Johor Bahru CBD.

- (2) IGB is rebuilding its retail mall portfolio whichwould provide a new stream of income and is very much in-line with its businessmodel of developing and growing investment properties. 

- We estimate the mall would provide an additional NOI of RM50mil(or accounts for 14% of our NOI estimate for FY12F) p.a to IGB, assuming an NLAof 1.5mil sf, a conservative rental rate of RM5psf and occupancy rate of 70%.Plus assuming a 7% cap rate the mall would provide a decent 5% uplift to ourNAV estimate.

- We continue to like IGB Corp because the group is lookingat crystallising the deep value of its retail malls in Mid-Valley City 'triggered by high implied capital values. The group would likely to follow upwith an office  and hospitality REITsubsequently. Our fair value is maintained at RM3.50/share.

Source: AmeSecurities

IGB Corporation - Building a megamall in Johor BUY

Stock Name: IGB
Company Name: IGB CORPORATION BHD

Research House: AMMB

Price Call: BUY

Target Price: 3.50

- It was reported in the press today that IGB intends todevelop a megamall ' which will have a GFA of 3 million sf ' in SouthKey, JohorBahru, which is estimated to cost RM2bilRM3bil. 

- IGB may have a 70%-equity stake in the mall with the restto be taken up by Selia Pantai ' the developer of Southkey ' of which IGB willsign an MoU in the near term. This is not a surprise given that IGB has indicatedit has been looking for pockets of land in Johor for development.

- To recap, South Key is a mixed commercial developmentspanning over 300 acres which enjoys frontage of Jalan Tebrau, Jalan Bakar Batuas well as the recently-completed Eastern Dispersal Link. It is located justfive minutes away from Sultan Iskandar Custms, Immigration and Quarantine (CIQ)complex.

- We view this positively because:- (1) we believe the mallwould be a success given the area's sizeable catchment population of more than120,000 and the lack of quality malls within it. 

- At present, the total NLA in Johor Bahru is estimated tobe at 11.6 million sf with an average occupancy rate in excess of 80%.  In the pipeline includes a lifestyle mall(GFA: 1mil sf) by Iskandar Investment Bhd located at Medini North and theredevelopment of Komtar retail mall (GFA: 0.4mil sf) in Johor Bahru CBD.

- (2) IGB is rebuilding its retail mall portfolio whichwould provide a new stream of income and is very much in-line with its businessmodel of developing and growing investment properties. 

- We estimate the mall would provide an additional NOI ofRM76mil p.a to IGB, assuming an NLA of 1.5mil sf, a conservative rental rate ofRM5psf and occupancy rate of 70%. 

- We continue to like IGB Corp because the group is lookingat crystallising the deep value of its retail malls in Mid-Valley City 'triggered by high implied capital values. The group would likely to follow upwith an office and hospitality REIT subsequently. Our fair value is maintainedat RM3.50/share.

Source: AmeSecurities 

IGB - AmResearch keeps 'hold' call on IGB

Stock Name: IGB
Company Name: IGB CORPORATION BHD
Research House: AMMB

AmResearch expects a decent take-up rate for two of IGB Corp's upcoming residential projects this year, given that it has strong followers, despite the soft condo market within the Kuala
Lumpur City Centre and Golden Triangle area.

One of the projects is G Residence in Desa Pandan. It comprises 475 service apartment units with a retail podium, said to be priced around RM800 per square feet, given that the site is facing the upmarket Jalan U-Thant.

In a note today, AmResearch reaffirmed its "hold" rating on IGB, given that the group has not taken advantage of the robust residential property market with the lack of new launches over the past two years.

"However, its income would be supported by its investment properties mostly located within the mature Mid Valley City, accounting for 55 per cent of our financial year 2011 forecast earnings estimate," it said. -- Bernama

IGB - IGB falls on plan to inject The Gardens Mall into KrisAssets

Stock Name: IGB
Company Name: IGB CORPORATION BHD
Research House: AMMB

KUALA LUMPUR: Securities of IGB Corp Bhd fell in late morning on Wednesday, Feb 16 after it announced its plan to inject The Gardens Mall into its 75%-owned KRISASSETS HOLDINGS BHD [].

At 11.01am, IGB was down 11 sen to RM2.21 with 5.07 million shares done and the call warrants IGB-CB lost 8.5 sen to 27.5 sen with 25,000 units transacted.

The FBM KLCI fell 2.34 points to 1,502.99. Turnover was 691.9 million shares valued at RM575.26 million. There were 218 gainers, 382 losers and 263 stocks unchanged.

IGB announced on Monday that it had entered into a heads of agreement with KrisAssets for the proposed disposal of 100,000 ordinary shares of RM1 each representing the entire paid-up share capital in Mid Valley City Gardens Sdn Bhd (MVCG) to KrisAssets for a cash consideration.

It would be based on the net tangible asset of MVCG based on the audited financial statements for the financial year ended Dec 31, 2010 and also the market value of the piece of land together with The Gardens Mall with an indicative value of RM820 million.

AmResearch said on Wednesday it was maintaining its HOLD for IGB with the fair value revised to RM2.33 a share.

'Our fair value is arrived at after applying a 45% discount to our revised NAV estimate of RM4.24/share. Our NAV is revised as we rolled over our valuation to FY11F while also including new development projects,' it said.

IGB - OSK maintains 'buy' call on IGB Corp

Stock Name: IGB
Company Name: IGB CORPORATION BHD
Research House: OSK

OSK Research Sdn Bhd maintains a "buy" call on the IGB Corporation stock based on the potential net gain it may get from the sale of The Gardens Mall at Mid Valley City.

On Monday, IGB proposed to sell The Gardens Mall to its 75 per cent-owned subsidiary KrisAssets Holdings Bhd.

The property's disposal may potentially give rise to a 11.4 sen net gain after tax based on the estimated RM820 million market value, it said in a research note today.

OSK Research estimated that the RM820 million could translate into a net yield of six to seven per cent, a relatively fair valuation for any prime shopping mall in the Klang Valley.

OSK has adjusted its target price for the stock from RM2.44 to RM2.50 for this year despite having to revise down its core earnings forecast by 23 per cent to reflect the mall's disposal to KrisAssets on higher minority interest.

At 12.14pm, IGB Corporation's stock dwindled 13 sen to RM2.19. OSK Research said that if they were to impute the potential net gain of 11.4 sen from The Gardens Mall's sale based on the above assumptions, this may translate this year's stock target price to RM2.64.

"(However), We're not imputing this potential gain into our valuation for now pending finalisation of the mall's selling price.

"Although the mall is valued at RM820 million by an independent valuer, the selling price will only be agreed upon 60 days from now," it added. -- Bernama