IGB REIT IPO Analysis Part 1

IGB REIT, a pure play retail REIT is to be listed at the Main Market of KLSE on 19th September 2012. It would be the largest REIT in Malaysia by market capitalization so far, surpassing Sunway REIT and Pavilion REIT.

IGB REIT first registrable IPO has just been submitted to the Securities Commision recently, and this gives the public a sneak peak into the business & fundamentals of Midvalley Megamall and the Gardens Mall.

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The prospectus is of 442 pages, and if you are not too financially inclined, you would probably fall asleep before page 50. The fact is, you don’t need to read every single detail in the prospectus – just need to look at the important ones. Many information are repeated in a few sections and the languages used in certain parts are too long-winded. But here’s the summary of the key metrics when conducting fundamental analysis for IGB REIT, per the previous article – How to Invest in REIT in Malaysia.

**This is not invitation to buy/sell. All public information taken from IPO which can be obtained from Securities Commission website.**

Click here for video and audio version of IGB REIT IPO Analysis Part 1

IGB REIT comprises of…

…only the mall components of Midvalley City, namely, Midvalley Megamall and the Gardens. Midvalley City is a mixed-used  development which also comprises of offices and hotels, but they are NOT part of this REIT.

IGB REIT Trustee is…

Am Trustee Berhad, a reputable trustee which also provides trusteeship service to a few other REITs in Malaysia.

IGB REIT Sponsor is…

IGB Corporation, a public listed company and one of Malaysia’s largest owners cum managers of investment properties, with diversified interests worldwide. The Sponsor currently manages the 2 malls through its subsidiaries, Kris Assets, which is 75.13% wholly owned by the Sponsor.

Retail Offering (IPO) Price is…

RM 1.25 per share.

Income distribution (dividend)

100 percent taxable income distribution to investors until 31 Dec 2013.

Forecasted DPU

6.38 cents (annualized) and 6.71 cents for 2012 and 2013 respectively.

Gross Yield

5.10 percent (annualized) and 5.37 percent for 2012 and 2013 respectively.

Important Dates below

Occupancy Rate

> 99 percent as of March 2012 (splendid!)

Tenant business breakdown

Diversified, with fashion/apparel outlets and department stores taking lion’s share of the pie in terms of NLA and gross rental income.

Gearing ratio (indebtedness)

Medium-low at 25.8 percent (lower, better)

Net Asset Value/share

RM 0.996. Hence, IPO price is trading at a premium due to the “premium perception” of the assets.

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Stay tuned for Part 2 of IGB REIT IPO Analysis, where we further dissect the strength, weakness, potential opportunities and threats of IGB REIT.

LCF (or Ching Foo, founder of HowToFinanceMoney.com,  is an avid REIT investor. LCF also co-founded REITMethod.com with KC Lau, the first REIT investment online educational course for Malaysians.