IGBB 5606 IGB BERHAD’s new high sparks talks of asset injections

 IGBB 5606 IGB BERHAD’s new high sparks talks of asset injections



You might have noticed that IGB Bhd reached a 52-high of RM3.10 in March while the company started accumulating shares under its share buyback scheme.


IGB bought back 737,300 shares in March when its share price started its climb to the peak.


In the meantime, IGB participated in their share buybacks, between March and May, totalling 813,300, amounting to RM2.89 million.


We know that when companies embark on share buybacks, it indicates that the shares are undervalued (in most cases, that is).


To strengthen the case, we can see foreign funds such as HSBC accumulating IGB shares almost on a daily basis to own more than 7% last month.


There is no denying that IGB is a retail-based recovery play.


It is a fundamentally sound company with deep values and strong cashflows.


The counter has been enjoying a great climb, having traded at a year low of  RM2.11


In the past year alone, the illiquid counter has risen some 30% to close at RM3 on May 10.


Such persistent rise in its share price could point to further parking its assets under IGB REIT.


For instance, the timing is probably ripe for the asset injection of Southkey Mid Valley mall in Johor as borders are fully opened and enjoys high occupancy rates now.


As such, higher footfalls are expected at IGB shopping malls and this will help support rental revision upwards and achieve better occupancy rate in its Mid Valley Southkey Mall in JB.


The timing of Mid Valley Southkey being injected into IGB REIT appears closer to materialising once IGB achieves the required valuation for it.


There are also potential catalysts as follows:


1) Another strong showing of its quarterly results and a decent interim dividend plus a special dividend arising from the proceeds from the UK land disposal.


2) Recovery in its hotel business with steady high occupancy rates and this could lead to a new hospitality REIT to house all its hotels.


3) Potential injection of its new office buildings North Tower and South Tower at Mid Valley Southkey into IGB Commercial REIT once these buildings reach attractive yields.


4) Successful takeup of 18@Medini housing project in Johor.


The above factors should help alleviate concerns on IGB’s slight fall in its FY2022 net profit.


In FY2022, IBG saw a 2% decline in its net profit to RM159.1 million from RM161.8 million in the previous year.  


This is despite a 39% jump in its revenue to RM1.3 billion from RM930.1 million in FY21.

 

The group explained that the drop in net profit was because FY2021 was supported by the one-off tax expense net of deferred tax of RM56.2 million from the disposal of certain investment properties held by the group to IGB Commercial REIT.  


Essentially, there are strong signs of a recovery in IGB numbers going forward as the economy picks ups and this will help the counter garner further investors’ interest.
#IGGB#IGBCR#IGBREIT

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