Case Study:  

IGB REIT  
(26 December 2019)  
 

Step #1:  
What does it do?  

IGB REIT derives income from two properties: the MidValley Megamall and the
Gardens Mall.

Step #2:  
Check MidValley Megamall (MVM) 

MVM is a leasehold retail mall situated in Kuala Lumpur measuring 1.82 million
sq. ft. in net lettable area (NLA). As of 31 December 2018, it has enjoyed 99.3%
occupancy rate with 556 tenants. MVM has reported growth in its revenue and
net property income (NPI) over the last 5 years which is as shown below:

Figures in RM Million
Year 2014 2015 2016 2017 2018

Revenue 319.0 340.0 354.7 366.4 375.0

NPI 224.2 250.4 266.3 277.9 286.4

Step #3:  
Check the Gardens Mall (TGM) 

TGM is also leasehold and is located beside MVM, measuring 0.84 million sq.
ft. in NLA. As at 31 December 2018, it enjoys 97.2% occupancy rate with a total
of 237 tenants. Likewise, TGM has reported growth in revenue & NPI over the
last 5 years as shown below:

 
Figures in RM Million
Year 2014 2015 2016 2017 2018

Revenue 142.8 149.1 152.7 158.5 160.6

NPI 88.5 92.4 94.8 95.7 99.9

Step #4:  
Check Financial Results  

Figures in RM Million unless stated otherwise

Year 2014 2015 2016 2017 2018

Revenue 461.8 489.2 507.3 524.9 535.7

DI 268.8 291.0 316.3 342.8 341.4

DPU (Sen) 7.79 8.19 8.71 9.28 9.19

Notes:
IGB REIT has reported consistent increase in revenues, distribution income,
and distribution per unit during the 5-year period. It is attributable to
increments by MVM and TGM.

Step #5:  
Check Balance Sheet Strength 

As of 30 September 2019, IGB REIT has RM 1.20 billion in total borrowings and
a total of RM 5.20 billion in total assets. Thus, its gearing ratio is 23.1%, which
is below the 50% mentioned in its gearing policy.

Step #6:  
Check Quarterly Results  

 
 Source: Quarterly Reports of IGB REIT

Figures in RM ‘000 unless stated otherwise

Period Q4 2018 Q1 2019 Q2 2019 Q3 2019 Total

Revenue 137,206 141,232 134,974 136,312 549,724

DI 84,977 89,455 84,383 86,352 345,167

DPU (Sen) 2.28 2.40 2.26 2.31 9.25

Notes:
For the last 12 months, IGB REIT has reported RM 549.7 million in revenues
and RM 345.2 million in distributable income (DI). Its distribution per unit
(DPU) is a total of 9.25 sen.

Step #7:  
Check Future Prospects  

IGB REIT does not embark in any acquisition or disposal of properties. Hence, it
would continue to generate income from its two properties currently.

 
As I write, IGB REIT is trading at RM 1.91 a share. Thus,

Step #8:  
What’s my Gross Dividend Yield?  

From Step #6, IGB REIT has paid out 9.25 sen in DPU for the past 12 months. Its
Gross Dividend Yield is 4.84%. It is slightly below its 5-Year Average of 5.71%.

Gross Dividend Yield Formula

= (Gross DPU / Stock Price) x 100%
= (RM 0.0925 / RM 1.91) x 100%
= 4.84%

Key Statistics:
5-Year Lowest Gross Dividend Dividend Yield = 5.16%
5-Year Highest Gross Dividend Dividend Yield = 6.11%
5-Year Average Gross Dividend Dividend Yield = 5.59%
Current Gross Dividend Yield = 4.84%

Step #9:  
What’s my Net Dividend Yield?  

The DPU declared is a Gross Figure as it is before Withholding Tax. The net DPU
you would receive is netted after, withholding tax on the taxable portion of the
Gross DPU declared. Here, I’ll provide a breakdown of both its taxable and non-
taxable portion of the DPU and its calculation of net distribution yields:

Thus, your net Dividend Yield (excluding brokerage fees) is:

= (Net DPU / Stock Price) x 100%
= (RM 0.08341 / RM 1.91) x 100%
= 4.37%

 
 Gross DPU Taxable Portion of Non-Taxable of
Period (Sen) Gross DPU (Sen) Gross DPU (Sen)

Q4 2018 2.28 2.24 0.04

Q1 2019 2.40 2.36 0.04

Q2 2019 2.26 2.22 0.04

Q3 2019 2.31 2.27 0.04

Total 9.25 9.09 0.16

Net 8.341 8.181 0.160

DPU (Sen) (9.09 x 90%) (Tax exempt)

Step #10:  
Check Price-to-NAV Ratio 

As at 30 September 2019, IGB REIT has net asset value of RM 1.07 per unit. At
current price of RM 1.91, its current P/B ratio is 1.90, above its 5-Year Average
of 1.47 currently.

P/NAV Ratio
= Stock Price / Net Asset Value a Share
= RM 1.91 / RM 1.07 = 1.79

Key Statistics:
5-Year Lowest P/NAV Ratio = 1.23
5-Year Highest P/NAV Ratio = 1.70
5-Year Average P/NAV Ratio = 1.47
Current P/NAV = 1.79

Step #11:  
Understand the Relationship between  
IGB REIT’s DPU and Stock Price  

 
 Source: Quarterly Reports of IGB REIT

Source: Google Finance

Notes:
Evidently, IGB REIT’s stock price has moved in line with its DPU over the past 5
years. Thus, ‘Growth in Profits’ led to ‘Growth in Stock Price’.

Final Statistics:
As at 26 December 2019, I have learnt the following:

 
 Step No. Criteria Results

1 Past Track Record Growth

(1)
Quality 2 Present Balance Sheet Low-Geared

3 Future Growth None

4.84%
4 Gross Dividend Yield (Below Average)

(2) 4.37%
Valuation 5 Net Dividend Yield (Below Average)

1.79
6 P/NAV Ratio (Above Average)

 
Disclaimer:  
The case study above is intended for education & illustration purposes and is
strictly not intended to be an investment advice or recommendation to buy /
hold / sell the security mentioned.

If you need specific investment advice, please consult a qualified or relevant

professional investment advisors. No warranty is made with respect to the case
study’s accuracy, adequacy, reliability, applicability, or completeness of these
information contained.

The author disclaims any reward or responsibility for any gains or losses arising
from direct and indirect use & application of any contents of the case study
above.