17 October 2011
PP16832/01/2012 (029059)
Initiating Coverage
17 October 2012
PP16832/01/2013 (031128)
Malaysia
IGB REIT The REIT-ail Giant
The rise of another giant REIT. We initiate coverage on IGB REIT
(IGBR) with a HOLD and a MYR1.39 DCF-based TP. IGBR provides
investors the exposure to the largest REIT by market capitalization and
2nd
largest by free float in Malaysia. Growth will be underpinned by
organic growth in its existing retail assets - Mid Valley Megamall (MVM)
and The Gardens Mall (GM).
Superior location draws crowd. Strategically located in the heart of
Mid Valley City and the fringe of Kuala Lumpur CBD, MVM and GM are
supported by offices and mature affluent townships within/surrounding
the Mid Valley City. Footfall of the two malls has been stable at around
34m p.a. despite rising competition from new malls. Its attractiveness
will be further enhanced by ongoing and future mixed developments in
the surrounding areas, which would further grow its catchment.
Benefits from improving connectivity and accessibility. IGBR is set
to benefit from the upcoming MRT Circle Line under the Greater
KL/KV‟s integrated urban transportation system via a proposed linkage
from Mid Valley City to KL Eco City‟s Komuter/LRT/MRT station. We
believe that increased accessibility and connectivity will drive shopper
traffic further and this will in turn serve as a strong catalyst to IGBR‟s
capital value and bargaining power for positive rental reversions.
The perfect match. IGBR has a good combination of mature and
young assets - MVM anchors the earnings base while the relatively
young GM provides significant room to grow average rental, which was
19% below the MVM on a psf basis in 5M12. 18.5% of IGBR‟s rental
income is backed by long lease agreements whilst the portfolio tenancy
expiry profile is well spread out, with 39% and 31% of the tenancies due
for renewal in 2013 and 2014 respectively; provides income stability.
Fairly valued. Our TP translates to an implied yield of 5%, versus a
4.9% average for large cap retail REITs (4.8% for PavREIT and CMMT,
5.3% for SunREIT). We like IGBR for its quality assets, earnings
resilience and liquidity. IGBR‟s relatively low 26% debt-to-asset ratio
allows it the capacity to borrow another MYR2.3b for asset acquisitions.
IGB REIT–Summary Earnings Table *Listed on 21 Sep 12 Source: Maybank KE
FYE Dec (MYR m) 4M2012F* 2013F 2014F Total revenue 114.4 421.1 433.4
Net property income 77.5 287.4 295.6
Recurring Net Profit 54.0 204.3 211.9
Recurring Basic EPU (Sen) 1.6 6.0 6.2
EPU growth (%) - - 3.2
DPU (Sen) 1.8 7.0 6.8
PER ̂-annualised 24.4 23.2 22.5
EV/EBITDA (x) 21.1 20.2 19.6
Div Yield (%) -annualised 4.8 5.0 4.9
P/NAV(x) 1.4 1.4 1.4
Gearing (%) 26.2 26.2 26.2
ROE (%) 5.7 6.0 6.2
ROA (%) 4.1 4.3 4.5
Consensus Net Profit (MYR m) 184.4 198.8 216.1
Hold (New)
Share price: MYR1.39 Target price: MYR1.39 (New)
Wong Wei Sum, CFA [email protected] (03) 2297 8679
Stock Information
Description: The largest retail REIT in Malaysia by asset size. Listing with 2 initial assets – Mid Valley Megamall (MYR3.4b in asset size; 73% of 2011 proforma NPI) and the
Gardens Mall (MYR1.2b; 27%). Ticker: IGBREIT MK Shares Issued (m): 3,400.0
Market Cap (MYR m): 4,726.0 3-mth Avg Daily Turnover (US$ m): 9.02 KLCI: 1,653.52 Free float (%): 49%
Major Shareholders: IGB Corporation 51%
Key Indicators
ROE – annualised (%) 6.1 Net cash (MYR m): (1,155.4) NTA/shr (MYR): 0.996
Historical Chart
1.34
1.35
1.36
1.37
1.38
1.39
1.40
1.41
1.42
1.43
Sep-12 Sep-12 Oct-12 Oct-12
IGBREIT MK Equity
Performance:
52-week High/Low MYR1.44/MYR1.25
1-mth 3-mth 6-mth 1-yr YTD
Absolute (%) - - - - -
Relative (%) - - - - -
Page 2 of 39
IGB REIT 17 October 2011
Contents
Executive Summary P3
Key Investment Merits
Merit 1 : MYR4.6b assets dwarves all listed REITs P5
Merit 2 : Superior location draws crowd P6
Merit 3 : Perfect match provides earnings growth and stability P10
Merit 4 : Ample headroom to grow P14
Merit 5 : Strong management team P15
Merit 6 : Favourable macro fundamentals P16
Risks and Concerns P18
Financials P19
Valuations P20
Income Statement & Balance Sheet P22
Property Profile – Mid Valley Megamall P23
Property Profile – The Gardens Mall P25
Appendix 1 – IGB REIT’s structure
Appendix 2 – Who’s who in IGB REIT
Appendix 3 – Background of the Sponsor
Appendix 4 – Background of the Trustee
Appendix 5 – Fee structure of IGB REIT
Appendix 6 – Fee comparison among various M-REITs
Appendix 7 – Accolades / awards
Page 3 of 39
IGB REIT 17 October 2011
Executive Summary
Highly sought after retail assets. IGB REIT (IGBR) is the largest
domestic REIT by market capitalization at MYR4.7b and the 2nd
largest
REIT by asset size at MYR4.6b (based on appraised value). It
comprises 2 properties: Mid Valley Megamall (MVM; MYR3.4b in asset
size; 74.8% of total asset portfolio) and The Gardens Mall (GM;
MYR1.2b; 25.2%). These properties form part of Mid Valley City – an
integrated commercial development which includes 1,683 hotel rooms
and serviced residences, seven blocks of commercial office buildings
(2.67m sq.ft. NLA) and 228 residential units.
Key investment merits. IGBR is a primarily retail-focused REIT and
the REIT manager, IGB REIT Management S/B, will continue its focus
on growing the retail-based assets through asset enhancement
initiatives and mall acquisitions both locally and overseas. IGBR‟s key
investment merits in our view include:
(i) Its size as the largest retail-focused REIT by asset size and the
largest REIT in Malaysia by market capitalization, thus providing an
international appeal.
(ii) Its superior location which provides long-term organic growth
potential. The properties are strategically placed within Mid Valley
City, one of the largest integrated developments in Malaysia,
catering to locals, business travelers and tourists. Mid Valley City
itself is located at the fringe of central Kuala Lumpur with proximity
to various middle to high income suburbs. We believe that
surrounding property developments (both current and in the future),
the upcoming MRT Circle line and a proposed linkage to the
existing Abdullah Hukum LRT station will further boost the footfall
and shopper traffic at the malls.
(iii) Its resilient earnings base, given that 18.5% of its gross rental
income is from tenants with long lease agreements. Also, the malls
have a diversified and sizeable tenant base of 663. No single tenant
contributes to more than 6% of total gross rental income.
Meanwhile, the portfolio tenancy expiry profile is well spread out
with 38.7% (by gross rental income) and 31% of the tenancies due
for renewal in 2013 and 2014 respectively, hence reducing earnings
volatility.
(iv) A perfect combination. In our opinion, the mature MVM, which
has 13 years of successful operation, provides for a strong and
stable earnings base while the relatively young GM (since 2007)
has the potential for stronger rental growth and hence higher
blended margins.
(v) Room for inorganic growth. With a relatively low debt-to-asset
ratio of 26%, IGBR has the ability to make yield accretive
acquisitions for growth. It has a potential war chest of approximately
MYR2.3b (at the 50% statutory limit) to fund new acquisitions
without the need to raise fresh equity capital. IGBR has been
granted the right of first refusal to acquire future retail properties in
Malaysia and overseas from its sponsor, IGB Corporation.
Page 4 of 39
IGB REIT 17 October 2011
In our opinion, working in favour of the REIT as well are the following
factors:
(i) Favourable macroeconomic fundamentals with (a) Malaysia‟s
population base being one of the fastest growing in the world, (b)
Malaysia‟s young population with a national median age of
approximately 26 years, and (c) rising affluence among Malaysians,
further spurred by the government‟s Economic Transformation
Programme (ETP) which aims at transforming Malaysia into a high
nation income by 2020 by doubling present GNI per capita to
RM48,000. In addition, the ETP‟s Greater Kuala Lumpur / Klang
Valley National Key Economic Area (NKEA) targets 10m population
for Greater KL/KV by 2012 versus 6m in 2010 while tourism will
remain an important income source to the Malaysian economy,
being one of 12 NKEAs emphasized in the ETP blueprint.
(ii) A very experienced management team. An added plus point for
IGBR is the experienced, senior team at the REIT Manager, led by
Anthony Patrick Barragry, who was involved in the development of
Mid Valley City since Day 1.
Valuation. We value IGBR at MYR1.39 based on a DCF approach as
we believe it rigorously accounts for 10 years of cashflow and a
terminal value, taking into consideration various assumptions on rental
reversions, occupancy rates and others. Our MYR1.39 TP translates to
an implied gross dividend yield of 5% (2013) which is marginally higher
than Pavilion REIT (PavREIT)‟s 4.8% and CapitaMall Malaysia Trust‟s
(CMMT) 4.8% but lower than Sunway REIT‟s (SunREIT) 5.3%.
Table 1: Portfolio of properties in IGB REIT
Mid Valley Megamall The Gardens Mall
Type Retail Retail
Appraised value as at 10 April 2012 (MYR`000) 3,440,000 1,160,000
Purchase consideration (MYR „000) 3,440,000 1,160,000
Subject properties weighting (by Appraised Value) (%) 74.8 25.2
NLA (sq ft) 1,718,951 817,053
GFA (sq ft) 6,107,103 3,379,510
Number of tenancies as at 31 Mar 2012 454 209
Occupancy rate as at 31 Mar 2012 (%) 99.8 99.7
Number of car park bays 6,092 4,128
Estimated footfall for 2011 („000) |--------------------------–––34,700 ----------------------------|
Sources: IGB REIT, CBRE
Page 5 of 39
IGB REIT 17 October 2011
Merit 1: MYR4.6b assets dwarves all listed REITs
The retail giant. With MYR4.6b in asset size, IGBR will be the 2nd
largest Malaysian REIT (M-REIT) after SunREIT‟s MYR4.9b (post-
acquisition of Sunway Medical Centre) (see Chart 1). Correspondingly,
IGBR will be the largest retail REIT in terms of appraised value and
gross floor area based on current available data from CBRE. In
comparison to its retail peers, it is 29% and 59% larger by asset size
than the likes of PavREIT and CapitaMalls Malaysia Trust (CMMT)
respectively and 4.6x larger than the small-cap Hektar REIT.
The largest REIT by market capitalization. IGBR‟s market
capitalization stood at MYR4.7b as at 15 Oct 2012. This compares
against a market capitalization of MYR4.2b for PavREIT, MYR4.1b for
SunREIT and MYR3.2b for CMMT.
Chart 1: Asset sizes of Malaysian REITs Chart 2: Free float of Malaysian REITs
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Atr
ium
Tow
er
Qui
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Am
anah
UO
A R
eit
Am
Firs
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Bou
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Al-A
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Axi
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Sta
rhill
Sun
RE
IT
Hek
tar
CM
MT
Pav
illio
n
IGB
MYR mRetail basedMixed
0
10
20
30
40
50
60
70
80
90
100
0
500
1,000
1,500
2,000
2,500
3,000
Atr
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UO
A R
eit
Am
anah
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Pav
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CM
MT
IGB
(%)(MYR m) Freefloat (LHS) Freefloat (RHS)
Retail basedMixed
Sources: Annual reports of entities listed, IGB REIT Sources: Annual reports of entities listed, Bloomberg, IGB REIT
Sizeable in free float. IGBR‟s market capitalization of MYR4.7b and its
sponsor‟s stake of 51% of IGBR post listing have made IGBR the 2nd
largest Malaysian REIT in terms of free float – MYR2.3b, compared to
SunREIT‟s MYR2.6b, PavREIT‟s MYR1.1b and CMMT‟s MYR2.1b. In
our view, IGBR‟s huge free float is an attractive feature not only to
domestic but also international investors.
Page 6 of 39
IGB REIT 17 October 2011
Merit 2: Superior location draws crowd
Strategic location. Size is not at the expense of quality. MVM and GM
are strategically located at the fringe of Kuala Lumpur CBD and at the
beginning of the Federal Highway which connects the city to the rest of
Greater Kuala Lumpur. The malls‟ close proximity to some affluent
suburbs such as Bangsar, Damansara Heights, Mont Kiara and
Seputeh as well as mature townships like Taman Desa, Old Klang
Road and Petaling Jaya provide for an immediate catchment area. Its
catchment area spans the entire 6.7m population in the Klang Valley
(source: CBRE).
Chart 3: Major areas in Kuala Lumpur
Kuala Lumpur Population (2010)1,674,621
Batu Caves
Gombak / Setapak / Wangsa Maju
Sentul
Kepong / Segambut / Jinjang
Damansara Heights / Mont Kiara
Mid Valley City KL Sentral / Bangsar
Kuala Lumpur CBD
Golden Triangle
Ampang
Pandan Jaya / Taman Maluri
Seputeh / Taman Desa
Sungai Besi / Salak Selatan
Old Klang Road / Kuchai Lama / Sri Petaling
Cheras
Sources: Google Maps, CBRE
The “Mid Valley City” element. One of the features that distinguishes
IGBR from other retail REITs (except for SunREIT) is that its malls are
located in the mature and integrated Mid Valley City, developed by its
sponsor IGB Corporation Berhad (“IGB Corporation”). Apart from MVM
and GM, the entire Mid Valley City development also includes three
hotels (1,484 hotel rooms and 199 suites), seven office buildings
(2.67m sq.ft. in NLA) and 228 service apartments.
Page 7 of 39
IGB REIT 17 October 2011
Figure1: Mid Valley City
Sources: IGB REIT
Support from self-contained Mid Valley City. In our opinion, the
substantial commercial content of Mid Valley City has contributed
steady shopper/tourist traffic to MVM and GM. The current office
population in Mid Valley is estimated at around 14,547 workers.
Including the office developments nearby, total office population is
estimated at 117,365 workers, according to CBRE. This will be further
boosted by IGB Corporation‟s last office development in Mid Valley
City, i.e. Mid Valley City Southpoint, which we expect to add a further
5,000-6,000 workers (+4-5%) and 2,000 extra car park lots (+19.6%)
from 2015.
Growing catchment provides long-term organic growth potential.
Ongoing projects such as KL Eco City, Bangsar South and KL Sentral
are still developing, providing for a growing office/resident/hotelier
catchment for IGBR‟s retail assets. For instance, we expect the
MYR6b-7b KL Eco City, which comprises offices, service apartments
and hotel rooms, to have an estimated population of 35,000 upon
completion. Future developments include the 40-acre Setia Federal
Hills which targets mid- to high-income residents. We believe its
residential growth potential and income profile will continue to drive
footfall at MVM and GM.
Excellent accessibility and connectivity. IGBR‟s retail assets are
easily accessible. Apart from a network of highways (Federal Highway,
East-West Link Expressway, New Pantai Expressway and North-South
Highway), major roads which connect to the malls‟ key catchment areas
include Jalan Syed Putra, Jalan Klang Lama, Federal Highway, Jalan
Maarof and Jalan Bangsar. Also, MVM and GM are directly linked to the
Seremban/Rawang KTM Komuter railway line, which registered the
second highest ridership of 2.2m in 2011 after KL Sentral Station
(source: CBRE).
Indirect beneficiary of ETP. Under the Greater Kuala Lumpur National
Key Economic Areas (NKEA) initiative (under the ETP blueprint), new
Mass Rapid Transit (MRT) lines, which include the MRT 2 Circle Line
will be built to improve public transportation and connectivity between
existing rail-based networks. The Circle Line, which is targeted to be
completed by 2020, will link areas such as KL Eco City, Mont Kiara,
Sentul Timur, Ampang and the MATRADE development.
Higher capacity with the MRT. The new MRT line is designed with
higher capacity in mind compared to the existing intra-city rail network.
Page 8 of 39
IGB REIT 17 October 2011
And unlike the existing rail network, a portion of the new MRT line will
pass through some of the more affluent neighborhoods in the Klang
Valley (for e.g. Mont Kiara). Also, under the same plan, the KL Monorail
will be extended to Taman Gembira in Old Klang Road and we expect
this to benefit surrounding areas including Mid Valley City.
More than just an MRT station. KL Eco City, a mixed development
opposite Mid Valley City, will be an integrated rail transport hub
accommodating the existing Abdullah Hukum Putra LRT, a new KTM
commuter station along the Sentul-Port Klang route and a station on the
MRT 2 Circle line. We understand that there will be a linkage
connecting Mid Valley City to KL Eco City, enhancing connectivity and
accessibility of MVM and GM (source: CBRE).
Higher property value with superior transportation infrastructure.
We believe shopper traffic to MVM and GM will improve further once
the transport linkages are completed and the MRT Circle Line is fully
operational, thus translating to better accessibility and connectivity. We
believe that this will in turn translate into stronger bargaining power for
rental reversions while eventually boosting the capital values of IGBR.
Chart 4: Proposed MRT line
Sg. Buloh
Kg. BaruSg. Buloh
Kota Damansara
Taman Industri Sg. Buloh
PJU5
Dataran Sunway
The Curve
One Utama
TTDI
Seksyen 16 Semantan
KL Sentral
Pasar Seni
WarisanMerdeka
Bukit Bintang Central
Cochrane
Maluri
Taman Bukit Ria
Taman Bukit Mewah
Leisure Mall
Plaza Pheonix
Taman Suntex
Taman Cuepacs
Bandar Tun Hussein Onn
Balakong
Taman Koperasi
Saujana Impian
Bandar Kajang
Kajang
Pasar Rakyat (KLIFD)
KL Eco City
Pusat Bandar
Damansara
Matrade
Sentul
Kampung Baru
Semantan
Source: Maybank KE, MRT Corp, KL Eco City websites
Page 9 of 39
IGB REIT 17 October 2011
Chart 5: Existing transportation system
Sources: Maybank KE, CBRE
Page 10 of 39
IGB REIT 17 October 2011
Merit 3: Perfect match provides earnings growth and stability
IGBR’s malls are a resilient asset class, we believe. It is our view
that strategically located sub-urban malls in Klang Valley tends to be a
more resilient asset class during an economic downturn compared to
their peers in the KL City centre due to the residential catchment of the
former. The footfall of MVM and GM are mainly supported by the
office/residential population from Mid Valley City and surrounding
townships. The malls‟ 34.7m shopper traffic in 2011 was spread
between office workers and residents/tourists, hence lowering
concentration risk.
All under one roof. IGBR‟s MVM and GM complement each other with
different niche and style; combined, they create a shopping paradise.
MVM, one of the largest malls in Malaysia “for all kinds of everything” is
served as a family, tourist and lifestyle destination for locals and tourists
whilst GM is positioned as a premium fashion mall focused on the
higher income segment. The complementary nature of IGBR‟s
properties allows it to benefit from the diverse and ever-changing trends
in consumer spending.
Sustainable and diversified earnings base. 18.5% of IGBR‟s total
gross rental income is backed by tenants with long lease agreements.
These include reputable international department stores such as
AEON, Carrefour, Isetan and Robinsons and other retailers such as
Celebrity Fitness and and Golden Screen Cinema. As at May 2012,
IGBR has a diversified and sizeable tenant base of 663 tenants. No
single tenant contributes to more than 6% of gross rental income.
Well spread-out lease expiry. IGBR‟s portfolio tenancy expiry profile is
well spread out with 38.7% (by gross rental income) and 31.0% of the
tenancies due for renewal in 2013 and 2014 respectively, hence
reducing earnings volatility. MVM and GM typically have three-year
lease terms.
Chart 6: Tenancy expiry profile (by gross rental income)- IGBR
Chart 7: Tenancy expiry profile – Mid Valley Megamall
Chart 8: Tenancy expiry profile – The Gardens Mall
19
38.7
31
0
10
20
30
40
50
2012 2013 2014
17.8
31
35.5
0
10
20
30
40
50
2012 2013 2014
19.8
57.5
22.2
0
10
20
30
40
50
60
2012 2013 2014
Source: IGB REIT Source: IGB REIT Source: IGB REIT
Page 11 of 39
IGB REIT 17 October 2011
IGBR’s malls have prospered amid the competition. MVM and GM
have weathered recessions, changes in retail trends and demand as
well as rising competition from new supply of retail space; and continue
to prosper. This is reflected in its steady 32 – 34.7m shopper traffic p.a.
despite the surge in new mall spaces between 2009-2011. Instead,
MVM and GM have outperformed most shopping malls in the Klang
Valley with a close to 100% occupancy rate (MVM – 99.8% tenanted;
GM - 99.7% occupied as at May 2012) from 2009 until May 2012.
Chart 9: Mid Valley Megamall remains popular among retailers with close to 100% occupancy rate
Chart 10: Occupancy rate of The Gardens Mall has been improving since 2009
100.0 99.9 100.0 99.8
90.0
92.0
94.0
96.0
98.0
100.0
2009 2010 2011 May-12
(%)
96.7
98.2
99.6 99.7
90
92
94
96
98
100
2009 2010 2011 1Q12
(%)
Sources: IGB REIT Sources: IGB REIT
Chart 11: Occupancy rates for Klang Valley Malls, 2000-2011
85
90
95
100
105
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Occupancy (%) Klang Valley Premium Mid & Mass
Sources: CBRE
Page 12 of 39
IGB REIT 17 October 2011
Chart 12: Retail space supply in Klang Valley, 2000-2015e
21.9
3
22.1
4
23.0
4
28.5
3
31.4
5
32.8
5
35.0
0
34.2
1
35.7
6
37.0
3
38.8
7
42.5
5
45.0
2
48.3
2
52.8
5
54.5
5
1.38
1.38
1.38
1.38 1.
38 1.38 1.
38 3.37 3.37 3.
37
3.37 3.
56 3.56 3.
56 3.86 4.
31
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
F
2013
F
2014
F
2015
F
Mid & Mass Market Mall Premium Fashion MallRetail Space(m sq ft)
Source: CBRE
Table 2: Future malls in Klang Valley 2011-2015
No. Name of mall Location Category NLA (sq.ft.) Expected completion
Kuala Lumpur
1 1 Shamelin Cheras Mass 420,000 2012
2 Nu Sentral KL Sentral Mass 650,000 2012
3 Damansara City Mall Damansara Heights Mass 188,452 2013
4 Pavilion KL Mall Extension KLCC-Bukit Bintang Premium 300,000 2014
5 Boustead Retail @ Jalan Cochrane Jalan Cochrane Mass 1,200,000 2014
6 Sunway Velocity Lifestyle Shopping Mall Cheras Mass 850,000 2014
7 Suria KLCC Extension KLCC-Bukit Bintang Premium 450,000 2015
Selangor
1 Paradigm Kelana Jaya Mass 700,000 2012
2 Setia City Mall Setia Alam Mass 700,000 2012
3 Atria Shopping Gallery Damansara Jaya Mass 660,000 2013
4 Cheras Central Shopping Mall Cheras Mass 456,973 2013
5 M Square Shopping Centre Puchong Mass 380,000 2013
6 The Strand Mall Kota Damansara Mass 308,800 2013
7 The Wharf Puchong Puchong Mass 302,739 2013
8 Empire City Mall Damansara Perdana Mass 1,000,000 2013
9 da:men USJ Mass 400,000 2014
10 IOI City mall Putrajaya Mass 1,350,000 2014
11 Jaya Shopping Centre Petaling Jaya Mass 300,000 2014
12 Sunway Pyramid 3 (SP3) Retail Extension Bandar Sunway Mass 62,000 2014
13 Avenue Street Mall Sungai Buloh Mass 370,000 2014
14 Damansara Uptown Mall Damansara Uptown Mass 400,000 2015
15 i-City Mall Shah Alam Mass 1,000,000 2015
16 KL Eco City Retail Podium Abdullah Hukum Mass 300,000 2015
Sources: CBRE
High occupancy rates are not at the expense of rental rates. The
substantially fully-tenanted MVM and GM have recorded commendable
growth in rental rates over the past 2 years – MVM recorded a +5.2%
CAGR in average rental rate between 2009-2011 compared to GM‟s
+7.3% for the same period. Their success can be attributed to their
time-tested location, the wide array of offerings and complementary
nature of IGBR‟s malls, as well as the management ability of IGBR. We
expect MVM and GM to continue to excel under the same experienced
management team post-listing of IGBR.
Page 13 of 39
IGB REIT 17 October 2011
Chart 13: Mid Valley Megamall’s average rental rate has been growing steadily
Chart 14: The Gardens Mall is playing catch up
9.22
9.69
10.21
10.75
8
8.5
9
9.5
10
10.5
11
2009 2010 2011 May-12
(MYR psf)
+5.2% CAGR between 2009-2011
7.32
7.54
8.43
8.74
6.5
7
7.5
8
8.5
9
2009 2010 2011 May-12
(MYR psf)
+7.3% CAGR between 2009-2011
Sources: IGB REIT, Maybank KE Sources: IGB REIT, Maybank KE
Perfect combination offers both stability and growth. In our view,
MVM is arguably one of the most successful malls in Klang Valley
today. This 99.8%-occupied MVM, which has 13 years of successful
operation, will form a strong and stable base for earnings, while the
relatively young GM (which began operations in 2007) has significant
room to catch up in terms of rentals and margins.
Mature but plenty of growth opportunity. Despite its large size and
high occupancy rate, MVM has strong rental growth potential. As
mentioned earlier, 41.6% of MVM‟s NLA is occupied by anchor tenants.
Therefore, the reconfiguration of some of these low-yielding spaces into
higher-yielding smaller retail units will provide an immediate boost to
rental income. Also, given the strong demand for space in MVM, we
see strong upward rental reversions. MVM‟s waiting list for new space
is still in excess of two years (source: CBRE).
The Gardens Mall to play catch-up. GM is a premium fashion mall in
the suburbs. This 5-year old mall has been designed to cater to more
specialty stores which pay higher rentals and to complement the
existing range offered by MVM. Despite a commendable 7% CAGR in
average rental over the past 2 years, rentals at GM are still at a huge
discount to its peers, at MYR8.7psf average monthly rental, versus
Sunway Pyramid‟s MYR10.3psf, Pavilion KL Mall‟s MYR17.0psf and
Suria KLCC‟s e.MYR20.0-25.0psf. It is also 17% below MVM‟s
MYR10.6psf. This indicates that GM has significant upside over time as
the mall matures.
Table 3: Comparison between The Gardens Mall, Pavilion Mall and Suria KLCC Premium fashion malls Opened since Visitors NLA Average rental
mil sq.ft. MYR psf
The Gardens Mall 2007 34* 0.8m 8.7
Pavilion KL Mall 2007 31 1.7m 17.0
Sunway Pyramid 1997 34 1.7m 10.3
Suria KLCC (including Suria KLCC extension)
1998, 2011 (Suria KLCC extension)
>40 1.2m 20.0-25.0
* estimated footfall for Mid Valley Megamall and The Gardens Mall
Sources: IGB REIT, trusts, KLCC Property, Maybank KE, CBRE
Page 14 of 39
IGB REIT 17 October 2011
Merit 4: Ample headroom to grow
There is room for inorganic growth. We estimate IGBR‟s debt-to-total
asset ratio to be 26% upon listing, which is significantly below the
statutory limit of 50% and the industry average of 31%. The
conservative capital structure will allow IGBR to take on additional debt
of up to MYR2.3b (at the 50% statutory limit) without the need to raise
funds in the equity market for future acquisition. We believe that the
MYR2.3b can easily raise IGBR‟s investment portfolio by 50% in asset
value, from MYR4,600m presently.
Chart 15: Comparison of M-REIT gearing (as at Aug 2012)
0
5
10
15
20
25
30
35
40
45
50
Sta
rhill
Bou
stea
d
Tow
er
Axi
s
Atr
ium
Sun
RE
IT
Am
anah
Qui
ll
UO
A R
eit
Am
Firs
t
Al-A
qar
Pav
illio
n
IGB
CM
MT
Hek
tar
Gearing (%)Retail basedMixed
Sources: IGB REIT, quarterly results, Maybank KE
Right of first refusal, 3rd
party acquisitions. IGBR will pursue
opportunities for asset acquisitions that provide attractive cash flows
and yields relative to its weighted average cost of capital (WACC).
However, it will also consider opportunities which are not immediately
yield accretive but will benefit unitholders over the long term. IGBR has
been granted the right of first refusal to acquire IGB Corporation‟s future
retail properties in Malaysia and overseas. In addition, IGBR will
explore third party acquisitions should such opportunity arise that meet
its investment criteria, including investing on a joint venture (JV) basis if
appropriate.
Mid- to long-term potential from its sponsor. IGB Corporation has
partnered with Selia Pantai S/B to set up a 70:30 JV company to
undertake a MYR6b-8b mixed development (which has similar concept
as Mid Valley City) in Johor. The “Southkey Megamall‟ in Johor, which
will be greater than Mid Valley City, will comprise a retail mall, hotels,
residences and commercial towers. It is in the midst of obtaining
approvals from the state government and construction is expected to
start by 1H13 with an estimated 5-year development period. Meanwhile,
IGB Corporation is also mulling the development of a megamall project
in Penang (source: Business Times).
IGBR‟s right of first refusal for IGB Corporation‟s retail properties
overseas also offers a pipeline of injections over the longer term. IGB
Corporation is said to have bid for a mixed development project in
Taipei and London.
Page 15 of 39
IGB REIT 17 October 2011
Merit 5: Strong management team
A wealth of retail experience. The IGBR management team is a well-
rounded team with a wealth of experience. The team is headed by Mr
Antony Patrick Barragry, the CEO (almost 35 years of international
experience in the design, development and operations of major mixed-
use developments) and assisted by Mr Daniel Yong, Joint COO (Mid
Valley Megamall; 13 years work experience with Mid Valley City Sdn
Bhd) and Elizabeth Tan Hui Ning, Joint COO (The Gardens Mall).
They are further supported by Ms Rennie Lee Chai Tin, Head of
Operations/Leasing (Mid Valley Megamall) with 19 years working
experience, Mr Ko Chai Huat, Head of Marketing (MVM) with 24 years
of experience and Ms Gabrielle Tan Hui Chween, Head of Marketing
(The Gardens Mall) with 5 years experience (see Appendix 2 for details
of the management team).
Proven management expertise. The MVM and GM were
conceptualized, planned, designed and built under the supervision of
the same team of senior management who are and will be running the
malls post-listing. We believe that this is proof of management expertise
in running the malls. Furthermore, it ensures business continuity and
their intimate knowledge of the properties can be further utilised to
enhance the layout and revenue of IGBR.
Ongoing asset enhancement initatives. The most recent example of
management‟s ability to enhance value is the reconfiguration of the
former MPH Bookstore space in MVM into high-yielding fashion retail
units i.e. MANGO – HE and TOUCH, Forever 21 and UNIQLO which
we believe has doubled its rental rate psf. As for GM, a repositioning
program was undertaken in 2009. The motivation behind the
repositioning program was to increase foot traffic in a more efficient
manner and to better suit the needs of the tenant base.
The management will continue to enhance and maximize NLA,
occupancy and rental rates via its active asset management strategies.
These include: i) ensuring a continued high level of shopper traffic in
MVM and GM, ii) continuing to improve rental rates whilst maintaining
high occupancy rates, iii) delivering high quality services to tenants and
maintain strong tenant relationship, iv) improving operational efficiency
and reducing operating cost and v) enhancing NLA via asset
enhancement initiatives.
Page 16 of 39
IGB REIT 17 October 2011
Merit 6: Favourable macro fundamentals
Retail spending on the rise. According to CEIC data, Malaysian retail
sales rose 10.6% YoY to MYR265b in 2011, growing at a faster pace
than the pace of economic growth of 5.1% during the year. Retail sales
currently account for about 39% of Malaysia‟s total GDP. The Retail
Association of Malaysia forecasts growth of 6% in 2012 retail sales.
Under the 10th Malaysia Plan, total retail sales are targeted to grow
annually by 8.3% between 2010 and 2015. The growth is underpinned
by key economic and demographic trends: (i) rising GDP and GDP per
capita which translates to greater spending power; (ii) low
unemployment rate; (ii) a growing, young population; (iii) increasing
urbanization; and (iv) rising tourist arrivals, which augment the domestic
consumer base.
Young and growing population. Malaysia‟s population stands at c.
28m with the estimated growth rate of 1.5% p.a. and the population of
Klang Valley, comprising Kuala Lumpur and its suburbs, has grown
from approximately 4m in 2000 to roughly 7.5m in 2012, with a large
number of migrants from other states within Malaysia and overseas.
Strategically located in the Mid Valley City, we believe that the retail
malls of IGBR benefit from both a city and a suburban catchment
(source: CBRE).
Rising affluence among Malaysians. The country‟s GDP per capita
has been rising steadily over the past 10 years from RM15,312 (2000)
to RM29,680 (2011) save for 2009 following the global financial crisis.
The national unemployment rate is also low at 3.0% (Mar 2012) while
the unemployment rate in KL and Selangor is estimated to be slightly
below 3%.
Government targets to grow GDP by 6% per year till 2020. Under
the Government‟s Economic Transformation Programme (ETP), it
hopes to transform Malaysia into a high-income nation by 2020 by
growing the economy by 6% a year till 2020. The target is to increase
Malaysia‟s Gross National Income (GNI) per capita from USD6,700 (or
RM23,700) in 2009 to more than USD15,000 (or RM48,000) in 2020
(source: PEMANDU).
Recent measures should encourage spending and consumption.
These include a financial aid of MYR500 for low-income households
(monthly income of MYR2,000 and below), a pay rise of up to 13% for
1.4m civil servants and the minimum wage implementation (with effect
from 1 Jan 2013). Further, the people-friendly Budget 2013 with more
goodies including bonus for civil servants, BR1M 2.0, reduced individual
income tax as well as the absence of GST should sustain domestic
demand.
Government on boosting tourism. Tourist arrivals and spending have
been steadily increasing since 2003‟s SARS, with 2011‟s total tourist
spending at RM58.3b, up from RM56.5b in 2010 (+3.2% YoY).
Correspondingly, tourist arrivals reach a new high in 2011 with 24.7m
tourist arrivals, up from 24.6m in 2009 (+0.6% YoY). Under the ETP,
tourism spending is targeted to grow at a rate of 11.5% per year to
reach RM168b by 2020, while tourist arrivals is targeted to grow by
3.9% per year to reach 36.0m by 2020 (source: PEMANDU).
Page 17 of 39
IGB REIT 17 October 2011
Chart 16: Malaysian retail sales are expected to continue growing
Chart 17: Rising income supports spending
0
10
20
30
40
50
60
70
80
33
34
35
36
37
38
39
40
Mar
-10
Jun
-10
Sep
-10
De
c-1
0
Mar
-11
Jun
-11
Sep
-11
De
c-1
1
Mar
-12
MYR b% Retail Sales (RHS) as % of Nominal GDP
(4.0)
(3.0)
(2.0)
(1.0)
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
0
5,000
10,000
15,000
20,000
25,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
20
12
F
2013
F
GDP/Capita(MYR)
GDP/Capita growth (%)
Sources: CEIC Sources: CEIC
Chart 18: Low unemployment rate at 3.0% Chart 19: Age profile of Malaysians
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
2012F
2013F
Malaysia's Unemployment Rate (%)
0.0 0.5 1.0 1.5 2.0 2.5 3.0
0-4
10-14
20-24
30-34
40-44
50-54
60-64
Above 70
population (m)
Age Group
Sources: CEIC, IMF Sources: CEIC
Page 18 of 39
IGB REIT 17 October 2011
Risks and Concerns
Single location risk. The asset portfolio is highly dependent on the
continuous appeal of Mid Valley City as a commercial hub of the Klang
Valley. This risk is partially mitigated by its status as one of largest
suburban malls in the Klang Valley with close proximity to major
townships as well as high connectivity post the start of the new MRT
operations. Going forward, this risk can be mitigated as and when IGBR
seeks to geographically diversify its asset base.
Competition. New suburbs / premium fashion retail malls with equally
good concepts may mushroom over time as Malaysia‟s economy
grows, drawing shopper crowd away from MVM and GM. This risk is
mitigated by the fact that MVM and GM are strategically located in Mid
Valley City, and at the fringe of KL City with its ready catchment of
locals, business crowd and tourists. Furthermore, accessibility of the
mall will be further improved when the proposed linkage to MRT station
is ready.
An economic downturn. An economic downturn would result in
spending cuts by consumers, which in turn may result in the loss of key
tenants. This risk is currently mitigated by the fact that the mall has a
large and well-diversified base of 663 tenants, with no single tenant
contributing over 6% of total gross rental income.
Debt refinancing and interest rate risks. We see these risks as low in
the medium term. IGBR‟s MYR1,200m fixed-rate term loan is due at the
earliest in 2017. 99% of the total financing facilities are at fixed rates
until 2017 at the earliest. The average effective cost of debt is about
4.5%.
Page 19 of 39
IGB REIT 17 October 2011
Financials
A retail-focused REIT. IGBR will comprise two retail assets, Mid Valley
Megamall (MVM) and The Gardens Mall (GM) purchased at cost of
MYR3,440m (74.8% of total asset value) and MYR1,160m (25.2%)
respectively. These assets will be recorded in IGBR‟s balance sheet at
MYR4,600m based on the appraised values.
Earnings forecasts. We project IGBR‟s 4M12 (21 Sep - Dec 2012),
2013 and 2014 total revenue at MYR114.4m, MYR421.1m and
MYR433.4m respectively. This, in turn, generates net property income
(NPI) of MYR77.5m (4M12), MYR287.4m (2013) and MYR295.6m
(2014) respectively, and pretax profit (after accounting for manager,
trustee expenses and borrowing costs) of MYR54.0m, MYR204.3m and
MYR211.9m respectively. We forecast the distributable income from
4M12-2014 at MYR62.8m, MYR237.2m and MYR231.2m respectively.
Key assumptions. Our forecasts are based on IGBR‟s initial portfolio
of property assets (i.e. MVM and GM) without taking into account
potential future acquisitions. We assume:
(i) Gross rental income increases by +2.7% in 2013 and +3.1% in
2014. This assumes tenancy agreements expiring in those
financial periods are renewed at 5% (for MVM) and 15% (GM)
higher rental with no step-ups for the next 3 years.
(ii) Occupancy rates of 99.8% and 99.7% throughout the 10-year DCF
period for MVM and GM. We have assumed a vacancy allowance
of 1% to our forecast gross annual rentals for MVM and GM.
(iii) Percentage rent (a.k.a. turnover rent) to increase by +5% p.a. in
2012 and 2013 and +3% p.a. thereafter to 2024. We expect non-
seasonal car park income to grow by +3% p.a. with “zero” hikes
for seasonal parking rate.
(iii) Maintenance fees and other expenses (e.g. utilities, advertising,
general & administrative expenses, property management fees &
reimbursements) to increase by 3% p.a..
(iv) Capital expenditure of MYR2.5m for 4M12, MYR6.3m for 2013,
and MYR6.5m for 2014. We have assumed a +3% annual growth
in capex thereafter till 2023.
(v) Distribution payout policy of 100% for 2012-14, and 95%
thereafter. Note that IGBR manager is committed to pay out at
least 100% of its distributable income in 2012-14 as dividends,
and at least 90% in the subsequent years.
(vi) Our dividend payout also assumes that 100% of the REIT
Manager‟s fee will be payable in IGBR units for 2012-13 and 50%
thereafter to 2023.
(vii) Borrowing cost of 4.06% (revolving credit) to 4.55% (term loan;
99% of total debt) p.a..
(viii) Management fees include base fee of 0.3% p.a. of total asset
value, 5% p.a. of net property income and trustee fee of
MYR280,000 p.a.
Page 20 of 39
IGB REIT 17 October 2011
Valuations
MYR1.39 DCF-based TP. We favour the DCF approach, as it
rigorously accounts for 10 years of cashflow and a terminal value,
taking into consideration various assumptions on rental rate changes,
occupancy rates, and others. Revenues are derived mainly from rents
paid by tenants, which are typically on a 2-3 years tenancy agreement,
while property and non-property expenses usually do not fluctuate
significantly. Note that our valuation model has yet to incorporate any
potential property acquisitions or pipeline of potential property injections
by its sponsor.
Our assumptions include: (i) a 10-year cash flow projection, (ii)
terminal yield of 5.5%, reflecting a decent capitalisation rate for prime
asset, and (iii) weighted average cost of capital (WACC) of 6.4%.
Table 4: Assumptions used for WACC discount rate
Risk free rate Rf 4.0% 10-year government bond yield
Cost of debt Kd 4.55%
Market return Rm 10.5% Maybank IB house‟s assumption
Beta β 0.6 Average of retail REITs
Target capital ratio
- Debt / (Debt + equity) Wd 40% Optimum structure
- Equity / (Debt + equity) We 60% Optimum structure
Cost of equity Ke 7.5% = Rf + (Rm – Rf) β
WACC Wc 6.4% = Kd (Wd) + Ke (Wd)
Source: Maybank KE
Deserves premium valuation. IGBR currently trades at a discount to
PavREIT, with a gross yield of 5% (FY13) vs the latter‟s 4.8%. This
could be attributed to the lack of near-term acquisitions as compared to
PavREIT (Pavilion KL Mall extension, farenheit88 and suburban mall in
Subang).
However, IGBR‟s yield is 30bps below SunREIT‟s 5.3%. This premium
to SunREIT is justifiable given IGBR‟s pure exposure to the retail sector
(about 37% of SunREIT‟s MYR4.9b asset size is from non-retail assets
such as medical centre, offices and hotels). Meanwhile, we prefer IGBR
over CMMT given the more superior location of its assets (at the fringe
of KL CBD versus CMMT‟s The Mines Shopping Mall) and full
management control over the properties (CMMT only owns 61.9% of
total NLA of Sungei Wang Plaza).
Page 21 of 39
IGB REIT
Table 5: Comparison between M-REITs
Trust Al Aqar KPJ
Al Hadharah Boustead
Amanah Raya*
AmFirst Atrium Axis REIT*
CMMT* Hektar Quill Capita*
Starhill SunREIT* Tower UOA REIT
PAV REIT*
IGB REIT*
Price (MYR) @ 15-Oct-12
1.44 1.99 0.93 1.13 1.26 3.05 1.81 1.43 1.20 1.05 1.52 1.43 1.42 1.38 1.38
Market cap (MYR m) 1,002.6 1,247.5 533.1 775.6 153.5 1,392.4 3,200.1 572.9 468.2 1,390.6 4,101.9 401.1 600.5 4,145.7 4,692.0
Asset portfolio
Hospital: 20
Commerci
al/Hotel: 1 Nursing
College: 1
Age Care Centre: 1
Plantation
estate: 12 Palm Mills:
3
Hotel: 2 Education:
2
Office: 5 Industrial:
5
Retail: 1
Office: 7 Mix: 1
(hotel, office, retail)
Office & Warehouse:
4 Office &
Factory: 1
Office &
warehouses: 25
Retail: 2
Retail: 4 Retail:
3
Office: 8 Mix: 1
(retail & parking
lots)
Retail: 1
Hotel: 8
Service Apartm
ent: 1
Hotel: 4 Retail: 4
Office: 3 Medical
centre: 1
Office: 3
Office: 5 Mix: 1
Retail: 1 Office: 1
Retail: 2
Investment
properties (MYR m) 1,453.3 1,280.5 944.8 1,182.1 194.7 1,396.4 2,888.0 822.0 814.8 1,577.2 4,940.0 607.2 1,027.3 3,566.3 4,600.0
Gearing ratio (%) 47.0 14.0 35.1 46.7 31.2 30.0 27.2 45.1 36.1 10.4 33.4 19.1 36.7 18.7 26.2
Free float (%) 14.0 46.4 34.1 61.8 71.7 61.4 64.6 28.8 40.0 30.6 63.3 52.6 23.2 26.3 49.0
Free float (MYR m) 140.1 579.1 181.9 479.2 110.0 854.4 2,067.3 164.9 187.3 425.9 2,595.7 210.9 139.5 1,091.6 2,299.1
6m average trading
volume (m) 0.6 0.2 0.2 0.6 0.0 0.2 1.2 0.1 0.1 0.5 1.2 0.1 0.1 1.2 na
NAV (MYR/sh) 1.10 1.80 1.05 1.39 1.11 2.07 1.15 1.49 1.30 1.15 1.10 1.69 1.43 0.95 0.99
Div yield (%)
- CY12F 5.8 6.0 7.8 8.2 6.3 5.8 4.8 7.7 7.2 7.9 5.0 7.7 7.7 4.7 4.8
- CY13F 6.0 6.3 8.0 8.2 7.1 6.0 4.8 7.7 7.5 9.0 5.2 7.7 7.7 4.8 5.0
P/NAV (x) 1.3 1.1 0.9 0.8 1.1 1.5 1.6 1.0 0.9 0.9 1.4 0.8 1.0 1.5 1.4
Source: Bloomberg, quarterly results, IGB REIT,* forecasts by Maybank KE
Page 22 of 39
IGB REIT
INCOME STATEMENT (MYR m) BALANCE SHEET (MYR m)
FY Dec 4M2012F* 2013F 2014F FY Dec 2012F* 2013F 2014F
Gross rental income 114.4 421.1 433.4 Fixed Assets 4,600.0 4,600.0 4,600.0
Property operating expenses (36.9) (133.7) (137.8) Other LT Assets 19.8 23.6 27.2
interest income 0.3 2.6 2.3 Cash/ST Investments 35.8 85.3 75.8
Net property income (NPI) 77.5 287.4 295.6 Other Current Assets 7.4 5.5 3.7
Interest (Exp)/Inc (15.3) (54.8) (54.8) Total Assets 4,662.9 4,714.4 4,706.6
Non-property expenses (8.4) (30.8) (31.2)
One-offs 0.0 0.0 0.0 ST Debt 12.6 12.6 12.6
Pre-Tax Profit 54.0 204.3 211.9 Other Current Liabilities 27.4 27.4 27.4
Tax 0.0 0.0 0.0 LT Debt 1,193.0 1,193.0 1,193.0
Net Profit 54.0 204.3 211.9 Other LT Liabilities 52.0 52.0 52.0
-realised 54.0 204.3 211.9 Minority Interest 0.0 0.0 0.0
-unrealised 0.0 0.0 0.0 Shareholders' Equity 3,378.0 3,429.5 3,421.7
Distributable income 62.8 237.2 231.2 Total Liabilities-Capital 4,662.9 4,714.4 4,706.6
Distribution to unitholders 62.8 237.2 231.2
Net Property Income Growth (%) NA 3.7 2.9 Number of units (m) 3,400.0 3,415.9 3,431.3
Pretax Profit Growth (%) NA 5.7 3.7 Gross Debt/(Cash) 1,205.6 1,205.6 1,205.6
Realised Net Profit Growth (%) NA 5.7 3.7 Net Debt/(Cash) 1,169.8 1,120.3 1,129.8
Payout ratio (%) 100.0 100.0 100.0 Working Capital 3.2 50.8 39.5
* listed on 21 Sep 2012
CASH FLOW (MYR m) WACC ASSUMPTIONS
FY Dec 4M2012F* 2013F 2014F
Profit before taxation 54.0 204.3 211.9 Risk-free Rate of Return 4.0
Depreciation 3.4 4.3 4.8 Long Term Cost of Debt 4.6
Net interest receipts/(payments) 15.0 52.2 52.5 Market Risk 10.5
Working capital change 0.0 0.0 0.0 Beta 0.6
Cash tax paid 0.0 0.0 0.0 Cost of Equity 7.5
Others (incl'd exceptional items) 7.8 28.5 14.5 Tax Rate -
Cash flow from operations 80.2 289.4 283.7 Weighted Cost of Capital 6.4
Capex (2.5) (6.3) (6.5) Growth 2.0
Disposal/(purchase) (4,612.6) 0.0 0.0 Terminal Value Discount 5.5
Others 0.3 2.6 2.3
Cash flow from investing (4,614.7) (3.7) (4.2)
Debt raised/(repaid) 1,212.6 0.0 0.0
Equity raised/(repaid) 3,400.0 0.0 0.0
Dividends (paid) 0.0 (181.4) (234.2)
Others (35.3) (54.8) (54.8)
Cash flow from financing 4,577.2 (236.1) (289.0)
Change in cash 42.8 49.5 (9.5)
Source: Maybank KE
Page 23 of 39
IGB REIT
Property Profile
Mid Valley Megamall is one of the biggest one-stop malls for local and
out-of-state residents. Opened in 1999, it was the first mall with a
megamall concept in Malaysia. Since 1999, Mid Valley Megamall has
received more than 18 awards and accolades.
Figure 2: Mid Valley Megamall
Source: IGB REIT
Page 24 of 39
IGB REIT
Table 6: Top 10 tenants of Mid Valley Megamall
Table 7: Mid Valley Megamall profile
Tenants Trade Sector Occupied NLA (%)
Description : 5-level retail mall with 1 mezzanine floor, 2 levels of basement car park and 4 levels of
elevated car park AEON Dept Store 17.6
Land area : 1,047,532 sq ft
Carrefour Dept Store 12.3
Gross floor area : 6,107,103 sq ft
Metrojaya Dept Store 11.7
Net lettable area : 1,718,951 sq ft
MVEC Exhibition Centre 3.9
Number of car parks : 6,092 (31 May 2012)
GSC Leisure 3.6
Number of tenants : 454 (31 May 2012)
Celebrity Fitness Health & Wellness 2.3
Age of property : 13
Cosmic Bowl Leisure 1.7
Tenure : 99-year leasehold expiring 6 June 2103
Forever 21 Apparel 1.3
Stake : 100%
Why Pay More / Studio R Entertainment & Leisure 1.2
Purchase consideration
: MYR 3,440m
Ace Hardware Home & Gift 1.1
Appraised value : MYR 3,440m (10 Apr 2012)
Total 56.7
Transacted value : MYR 2,003 / sq ft (on NLA)
Occupancy rate : 99.8% (31 May 2012)
Source: IGB REIT
Source: IGB REIT
Chart 20: Trade sector by Gross Rental Income* Chart 21: Trade Sector by NLA*
14.9%
31.1%
11.2%
17.8%
9.1%
6.4%
1.3%
2.2% 1.3%
4.7%
Dept Store
Apparel
Leisure
F&B
Sundry & Services
Health & Wellness
Exhibition Centre
Home & Gift
Discounters
Timepiece & Jewellery
41.6%
14.0%
14.0%
11.6%
5.2%
4.3%
3.9%2.4%
1.8%1.2%
Dept Store
Apparel
Leisure
F&B
Sundry & Services
Health & Wellness
Exhibition Centre
Home & Gift
Discounters
Timepiece & Jewellery
* as at 31 May 2012
Sources: IGB REIT
* as at 31 May 2012
Sources: IGB REIT
Chart 22: Historical renewal rates by NLA
89.6
92.893.1
87
88
89
90
91
92
93
94
2009 2010 2011
(%)
Sources: IGB REIT
Page 25 of 39
IGB REIT
Property Profile
The Gardens Mall is one of the premium shopping centres in the Klang
Valley. Located in the Mid Valley City, it provides premium shopping
experience for shoppers without having to go into town. The
architecture of The Gardens Mall is designed to create pleasant
environment by using local arts, crafts, flora and fauna.
Figure 3: The Gardens Mall
Source: IGB REIT
Page 26 of 39
IGB REIT
Table 8: Top 10 tenants of The Gardens Mall
Table 9: The Gardens Mall profile
Tenants Trade Sector Occupied NLA (%)
Description : 8-level retail mall with 4 levels of basement car park and 4 levels of elevated car park
Isetan Dept Store 18.1
Land area : 421,773 sq ft
Robinsons Dept Store 13.0
Gross floor area : 3,379,510 sq ft
GSC Signature Leisure 3.8
Net lettable area : 817,053 sq ft
X-Tra Home & Gift 2.9
Number of car parks : 4,128 (31 May 2012)
mYoga Health & Wellness 2.9
Number of tenants : 209 (31 May 2012)
Marketplace (Cold Storage)
Dept Store 2.8
Age of property : 5
Borders Leisure 2.7
Tenure : 99-year leasehold expiring 6 June 2103
Red Box Leisure 2.0
Stake : 100%
Marks & Spencer Apparel 1.9
Purchase consideration
: MYR 1,160m
Hokkaido Ichiba F&B 1.8
Appraised value : MYR 1,160m (10 Apr 2012)
Total 51.9
Transacted value : MYR 1,420 / sq ft (on NLA)
Occupancy rate : 99.7% (31 May 2012)
Source: IGB REIT
Source: IGB REIT
Chart 23: Trade sector by Gross Rental Income* Chart 24: Trade Sector by NLA*
14.7%
11.7%
18.8%
23.5%
6.6%
4.5%
7.8%
6.7%
5.7%
Dept Store
Leisure
F&B
Apparel
Home & Gift
Health & Wellness
Fashion (Luxury)
Sundry & Services
Timepiece & Jewellery
34.0%
16.0%15.5%
13.3%
7.5%
6.0%
2.9%3.0%
1.8%
Dept Store
Leisure
F&B
Apparel
Home & Gift
Health & Wellness
Fashion (Luxury)
Sundry & Services
Timepiece & Jewellery
* as at 31 May 2012
Sources: IGB REIT
* as at 31 May 2012
Sources: IGB REIT
Chart 25: Historical renewal rates by NLA
67.9
89.1 88.9
0
10
20
30
40
50
60
70
80
90
100
2009 2010 2011
(%)
Sources: IGB REIT
Page 27 of 39
IGB REIT
Appendix 1: IGB REIT’s structure
IGB REIT is established with the principal investment strategy of
investing, directly and indirectly, in a diversified portfolio of income
producing real estate used primarily for retail purposes.
Chart 26: The structure of IGB REIT
IGB REIT
Unitholders
ManagerTrustee
Mid Valley Megamall The GardensMallProperty Manager
Acts on behalf of Unitholders
Trustee fees
Ownership of Deposited Property (Vested in trustee)
Income
ManagementServices
Management Fees
Property Management Fees
Property Management Services
Source: IGB REIT
IGB REIT Management Sdn Bhd is the manager of IGB REIT. The
Manager undertakes primary management activities in relation to IGB
REIT. Its main responsibility is to set the strategic direction of IGB REIT
and give recommendations to the Trustee on the acquisition,
divestment and enhancement of assets of IGB REIT in accordance with
its stated investment strategy. The Manager is wholly-owned by the
sponsor of IGB REIT, IGB Corporation (IGB). IGB is one of the
country‟s largest owners and managers of investment properties and it
is listed on Bursa Securities.
AmTrustee Berhad is the trustee of IGB REIT. The Trustee provides
corporate trusteeship services for IGB REIT. Chartwell ITAC
International Sdn Bhd is the property manager of IGB REIT. The
Property Manager is responsible for providing property management
services for the properties in IGB REIT‟s portfolio.
Page 28 of 39
IGB REIT
Appendix 2: Who’s who in IGB REIT
Chart 27: Organisation structure of IGB REIT management
Board of Directors
Chief Executive Officer
Antony Patrick Barragry
Joint Chief Operating Officer (Mid Valley Megamall)
Daniel Yong Chen-I
Joint Chief Operating Officer (The Gardens Mall)
Elizabeth Tan Hui Ning
Chief Financial Officer
Chai Lai Sim
Head of Compliance
Tina Chan Lai Yin
Head of Operations/ Leasing
(Mid Valley Megamall)
Rennie Lee Chai Tin
Head of Marketing (Mid Valley Megamall)
Ko Chai Huat
Head of Operations/ Leasing (The Gardens Mall)
Elizabeth Tan Hui Ning
Head of Marketing (The Gardens Mall)
Gabrielle Tan Hui Chween
Head of Investment
Chow Yeng Keet
Source: IGB REIT
Anthony Patrick Barragry, Chief Executive Officer of the Manager.
He is a qualified architect with 35 years of international experience in
the design, development and operations of major mixed-use
developments. His prior work experience includes the Putra World
Trade Centre and the Renaissance Kuala Lumpur Hotel, the Ciragan
Palace Hotel in Istanbul, and Jebel Ali Hotel development in Dubai. He
was previously Project Director in the construction of Mid Valley City
Phase 1, including Mid Valley Megamall and was subsequently
appointed as Executive Director of MVC in 2002. He was also Project
Director for the design and construction of the St Giles Hotel, Heathrow,
London and the upgrading of IGB‟s Pangkor Island Beach Resort. In
January 2008, he was appointed Chief Executive Officer of MVCG. He
holds a Diploma in Architecture from the University of Sheffield and is a
member of the International Council of Shopping Centers and FIABCI.
Daniel Yong Chen-I, Joint Chief Operating Officer (Mid Valley
Megamall) and a Non-Independent Executive Director of the Manager.
Daniel Yong is a law graduate from the University of Bristol, England.
He joined MVC in 1999 as a member of the pre-opening retail
development team. He was appointed an Executive Director of MVC in
2003 and has been responsible for overseeing the marketing, leasing,
management and operation of Mid Valley Megamall since. He was also
involved in the design and pre-opening of The Gardens Mall from 2004
to 2007. His prior work experience includes the development of
bespoke systems with BYG Systems Ltd in England and Operational
Page 29 of 39
IGB REIT
Management with Wah Seong Engineering Sdn Bhd, the distributor and
manufacturer for Toshiba Elevator and Escalators in Malaysia.
Elizabeth Tan Hui Ning, Joint Chief Operating Officer (The Gardens
Mall), Head of Operations/Leasing (The Gardens Mall) and a Non-
Independent Executive Director of the Manager. She is also the
Director of Leasing of MVCG. She joined MVCG in August 2004 and
subsequently assumed her present role as the Director of Leasing of
MVCG. She is responsible for the conceptualisation and strategy of the
tenant mix of The Gardens Mall as well as overseeing the leasing, retail
development and customer service departments. She graduated with
First Class Honours from Cardiff University, Wales, United Kingdom
with a degree in Business Administration (BSc) in June 2004.
Chai Lai Sim, Chief Financial Officer of the Manager. She has over
30 years of experience in audit, corporate finance, capital management
strategy including treasury, financial accounting and taxation in property
development, commercial and retail property investment and hospitality
industries. She began her career as an articled student with Coopers &
Lybrand (now known as PricewaterhouseCoopers) before joining Tan &
Tan Developments Berhad as the Group Financial Controller in 1993.
Following the completion of the merger between Tan & Tan
Developments Berhad and IGB in 2002, she was appointed the Senior
Group General Manager of Group Finance and subsequently assumed
the present role of Group Chief Financial Officer of IGB. She is a
member of both the Malaysian Institute of Accountants (MIA) and the
Malaysian Institute of Certified Public Accountants (MICPA).
Tina Chan Lai Yin, Head of Compliance of the Manager. She has a
broad knowledge and skill-base in corporate secretarial work, having 20
years working experience. She is presently the Company Secretary of
the IGB group, a position which she has held since 1997. She is also
the Company Secretary of the KrisAssets group. Prior to joining IGB,
she had worked in a legal firm, Rahman Hashim, V.T. Ravindran and
Partners where she was the Company Secretary cum Administrator and
was later attached to Tan & Tan Developments Berhad, her last
position there being the Joint Company Secretary. She is an Associate
of The Institute of Chartered Secretaries and Administrators.
Rennie Lee Chai Tin, Head of Operations / Leasing (Mid Valley
Megamall) of the Manager and General Manager of MVC. She joined
MVC in 1995. She has about 19 years of work experience in leasing
and operations within the retail industry. She is credited with being part
of the founding team in the marketing of Mid Valley City. Her previous
work experience includes the leasing and marketing of Mahkota Parade
in Malacca, Subang Parade and IOI shopping centers in Kuala Lumpur.
She was a key member of Mid Valley Megamall pre-opening team.
Ko Chai Huat, Head of Marketing (Mid Valley Megamall) of the
Manager and Director of Design of MVC. He joined MVC in 1999. He
has about 24 years of work experience in visual merchandising as well
as advertising and promotion. He was formerly Visual Merchandising
Manager at Atria Shopping Centre in Kuala Lumpur. He directs,
conceptualises and leads all design set ups for promotional activities
and events in Mid Valley Megamall. He was a key member of the Mid
Valley Megamall pre-opening team. He holds a Diploma in Fine Arts.
Chow Yeng Keet, Head of Investment of the Manager. He is
presently the General Manager, Corporate Finance of IGB and Director
of Finance of MVC. He has 15 years of experience in corporate finance
Page 30 of 39
IGB REIT
and advisory covering mergers and acquisitions, equity and debt fund
raising, capital management and restructuring, valuations as well as
take-over offers. He started his career as Corporate Finance Executive
with the then Sime Merchant Bankers Berhad in 1997. Thereafter, he
was with Commerce International Merchant Bankers Berhad (now
known as CIMB) for five years where his last position was as a
Corporate Finance Manager prior to joining IGB in 2004. Currently, he
is involved in corporate finance as well as finance and accounts of the
KrisAssets group. He holds a Bachelor of Economics (First Class
Honours) from University of Malaya and is a Fellow of the Association
of Chartered Certified Accountants.
Gabrielle Tan Hui Chween, Head of Marketing (The Gardens Mall)
of the Manager and Director of Marketing of MVCG. She holds a
Bachelor of Arts in Business Economics from the University of Exeter,
United Kingdom and a Bachelor of Fine Arts degree in fashion design
and marketing from the American Intercontinental University - London,
United Kingdom. She joined MVCG as the Head of Marketing in 2007
and later assumed the role of Director of Marketing. She oversees the
advertising and promotions activities as well as the public relations
initiatives at The Gardens Mall. She is also a director of MVCG.
Directors of the REIT Manager
The Board is entrusted with the responsibility for the overall management of the Manager. The Board consists of nine Directors, as summarized below.
Table 10: Board of Directors of the REIT Manager
No. Name Nationality Position
1. Tan Sri Dato‟ Dr. Lin See Yan Malaysian Chairman and Independent Non-Executive Director
2. Robert Tan Chung Meng Malaysian Managing Director and Non-Independent Executive Director
3. Halim bin Haji Din Malaysian Independent Non-Executive Director
4. Le Ching Tai @ Lee Chen Chong Malaysian Independent Non-Executive Director
5. Tan Boon Lee Malaysian Non-Independent Non-Executive Director
6. Tan Lei Cheng Malaysian Non-Independent Non-Executive Director
7. Daniel Yong Chen-I Malaysian Non-Independent Executive Director
8. Elizabeth Tan Hui Ning Malaysian Non-Independent Executive Director
9. Tan Yee Seng Malaysian Non-Independent Non-Executive Director
Source: IGB REIT
Page 31 of 39
IGB REIT
Appendix 3: Background of the Sponsor
Listed on Bursa Securities, IGB Corporation Berhad is the Sponsor of
IGB REIT and it is one of the largest owners and managers of
investment properties in Malaysia with diversified interests worldwide.
The Sponsor‟s expertise includes site acquisition and project planning,
design and development, project management and construction,
marketing and leasing and asset and operational management. The
Sponsor‟s property development arm, Tan & Tan Development Berhad,
has a track record of more than 30 years in the Klang Valley.
Development at Mid Valley City is nearing a tail end, with the Sponsor
having commenced work on its final plot of land there, being a new
project called Mid Valley City Southpoint, a mixed office and retail
development which is expected to be completed around 2015.
In addition to the properties in Mid Valley City which it developed, the
Sponsor owns three hotels within Kuala Lumpur and two hotels in Kota
Kinabalu and Pangkor Island respectively. It also has interests in hotels
in the Philippines (Manila), Myanmar (Yangon) the United Kingdom
(London) and the United States of America (New York).
On 28 March 2012, the Sponsor entered into a memorandum of
understanding with Selia Pantai Sdn Bhd, to establish a 70:30 joint
venture to acquire three parcels of leasehold land measuring
approximately 36 acres within Southkey development in Johor, to be
developed into a retail mall and/or mixed development.
Page 32 of 39
IGB REIT
Appendix 4: Background of the Trustee
AmTrustee Berhad was incorporated in Malaysia under the Act on 28
July 1987. It is registered as a trust company under the Trust
Companies Act, 1949 and is also registered with the SC for trusteeship
service in respect of unit trust funds. As at the Latest Practicable Date,
the authorized share capital of the Trustee is MYR1,000,000 comprising
100,000 ordinary shares of MYR10.00 each, paid-up to MYR5.00 each
in accordance with Section 3(c) of the Trust Companies Act, 1949.
The principal activity of the Trustee is the provision of corporate
trusteeship services. The Trustee has been in the trustee business for
more than 25 years. As at the Latest Practicable Date, the Trustee‟s
staff force comprises of 27 executive staff and four non-executive staff.
The Trustee undertakes all types of trustee business allowed under the
Trust Companies Act, 1949, specializing in corporate trustee services
which include acting as trustee for private debt securities, unit trust
funds, provident and retirement funds, golf clubs and timeshares,
stakeholders and REITs. As of the Latest Practicable Date, the Trustee
is trustee for 22 unit trust funds and four listed REITs.
Table 11: Board of Directors of the Trustee
Name
Directorship
Madam Pushpa Rajadurai Chairman (Non-Independent Director)
En. Shaharuddin Bin Hassan Non-Independent Director
Tuan Hj Mohamad Sabirin Bin HjA.Rahman Non-Independent Director
Dato‟ Ng Mann Cheong Independent Director
Datuk Haji Mohd Idris Bin Mohd Isa Independent Director
Source: IGB REIT
Chief Executive Officer of the Trustee: Mr Tan Kok Cheeng
Mr Tan Kok Cheeng was appointed the Chief Executive Officer of
AmTrustee Berhad with effect from 1 October 2010. Prior to joining
AmTrustee Berhad, he served as the Chief Internal Auditor, Internal
Audit Department, AmBank Group then elevated as Internal Audit
Advisor, AmBank Group. He has been with AmBank for more than 25
years.
Page 33 of 39
IGB REIT
Appendix 5: Fee Structure of IGB REIT
Fees payable to the REIT Manager:
(i) Base fee
Up to 1% p.a. of the Total Asset Value (TAV), though the
Manager intends to charge a base fee of 0.3% in 2012 and 2013.
(ii) Performance fee
5% per annum of the Net Property Income (NPI) of IGB REIT
(iii) Acquisition fee
1% of the transaction value
(iv) Divestment fee
0.5% of the transaction value
Fees payable to the Property Manager:
(i) Property management fee
MYR20,000 per month and full reimbursement of costs and
expenses incurred in the operation, maintenance, management
and marketing of the two shopping malls.
(ii) Trustee‟s fee
Up to 0.03% per annum of the Net Asset Value (NAV) of IGB REIT, subject to a maximum of MYR280,000 per annum.
Page 34 of 39
IGB REIT
Appendix 6: Fee comparison among various M-REITs
Table 12: Comparison between M-REITs
Trust Al Aqar KPJ Al Hadharah Boustead
Amanah Raya*
AmFirst Atrium Axis REIT* CMMT* Hektar Quill Capita* Starhill SunREIT* Tower UOA REIT PAV REIT*
Ticker: AQAR MK BIRT MK AARET MK ARET MK ATRM MK AXRB MK CMMT MK HEKT MK QUIL MK STRH MK SREIT MK TRET MK UOAR MK PREIT MK
Fees structure:
Base fees 0.15% of
NAV
0.3 % of
NAV
1.0% of
NAV
0.5% of
GAV
1.0% of
NAV
1.0% of
NAV
1.0% of
GAV
1.0% of
GAV
0.4% of
GAV
1.0% of
GAV
0.3% of
GAV
0.75% of
GAV
1.0% of
NAV
1.0% of
TAV
Performance fees -
2.5% performance-
based profit sharing receivable
- 3.0% of
NPI - -
5.0% of
NPI
5.0% of
NPI
3.0% of
NPI
5.0% of
NPI
3.0% of
NPI
4.0% of
NPI -
5.0% of
NPI
Trust fees 0.03% of NAV
0.03% of NAV
0.1% of NAV
0.1% of NAV
0.04% of NAV subject to a
minimum fee of RM40,000 per annum
0.05% of NAV
0.02% of GAV for 1st
RM2b then 0.01% of GAV
thereafter
0.1% of NAV
0.03% of 1st RM2.5b of GAV and
0.02% on the GAV in excess
RM2.5b
0.03% of GAV
0.03% of NAV
0.03% of NAV
0.045% of NAV
0.05% of NAV
Others
Acquisition Fee 1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
1.0% of acq price
Divestment Fee 0.5% of disposal
price
0.5% of disposal
price
0.5% of disposal
price
0.5% of sale price
0.5% of disposal
price
0.5% of sale price
0.5% of sale price
0.5% of sale price
0.5% of sale price
0.5% of sale price
0.5% of sale price
0.5% of sale price
0.5% of disposal
price
0.5% of disposal
price
Incentive Fee
0.1%-0.2% depending on annual growth of
distributable income
Source: M-REITS’ Annual Reports, Maybank KE * stocks under Maybank KE coverage
17 October 2012 Page 35 of 39
IGB REIT 17 October 2011
Page 1 of 2
Appendix 7: Accolades / Awards
Since 1999, Mid Valley Megamall has received more than 18 awards
and accolades and some of the key awards include:
Finalist for Retail Merchant of the Year in the MasterCard Hall of
Fame Awards 2011;
Merit for Innovative Shopping Outlets 2010/2011 by Tourism Malaysia
Best Promotions and Events (Central Business District) Category for
Christmas 2009 in the Malaysia Year End Sale Awards 2009 by
Tourism Malaysia;
Best Promotions and Events (Central Business District) Category for
the Malaysia Mega Sale Carnival Awards 2009 by Tourism Malaysia;
MAXI Gold Award 2009 in Visual Merchandising category for the Hari
Raya 2008 Promotion by International Council of Shopping Centres;
Best Retail Development Award 2001 by FIABCI Malaysia;
Best Shopping Complex Award 2000 by Tourism Malaysia; and
Gold Award in the Shopping Complex of the Year Category 1999 by
Retail World Excellence Award.
17 October 2012 Page 36 of 39
IGB REIT 17 October 2011
Page 1 of 2
RESEARCH OFFICES REGIONAL
P K BASU Regional Head, Research & Economics
(65) 6432 1821 [email protected]
WONG Chew Hann, CA Acting Regional Head of Institutional Research
(603) 2297 8686 [email protected]
THAM Mun Hon, CFA Regional Strategist (852) 2268 0630 [email protected]
ONG Seng Yeow Regional Products & Planning (852) 2268 0644 [email protected]
ECONOMICS Suhaimi ILIAS Chief Economist
Singapore | Malaysia (603) 2297 8682 [email protected]
Luz LORENZO Economist Philippines | Indonesia (63) 2 849 8836 [email protected]
MALAYSIA WONG Chew Hann, CA Head of Research
(603) 2297 8686 [email protected] Strategy
Construction & Infrastructure Desmond CH’NG, ACA
(603) 2297 8680 [email protected] Banking - Regional
LIAW Thong Jung
(603) 2297 8688 [email protected] Oil & Gas Automotive
Shipping ONG Chee Ting, CA (603) 2297 8678 [email protected]
Plantations Mohshin AZIZ (603) 2297 8692 [email protected]
Aviation Petrochem Power
YIN Shao Yang, CPA (603) 2297 8916 [email protected] Gaming – Regional
Media Power
TAN CHI WEI, CFA (603) 2297 8690 [email protected] Construction & Infrastructure
Power WONG Wei Sum, CFA (603) 2297 8679 [email protected]
Property & REITs LEE Yen Ling (603) 2297 8691 [email protected]
Building Materials Manufacturing Technology
LEE Cheng Hooi Head of Retail
[email protected] Technicals
HONG KONG / CHINA Edward FUNG Head of Research
(852) 2268 0632 [email protected] Construction Ivan CHEUNG
(852) 2268 0634 [email protected] Property Industrial
Ivan LI (852) 2268 0641 [email protected]
Banking & Finance Jacqueline KO (852) 2268 0633 [email protected]
Consumer Staples Andy POON (852) 2268 0645 [email protected]
Telecom & equipment Alex YEUNG (852) 2268 0636 [email protected]
Industrial
INDIA Jigar SHAH Head of Research
(91) 22 6623 2601 [email protected]
Oil & Gas Automobile Cement
Anubhav GUPTA (91) 22 6623 2605 [email protected] Metal & Mining
Capital goods Property Ganesh RAM
(91) 226623 2607 [email protected] Telecom
Contractor
SINGAPORE Stephanie WONG Head of Research
(65) 6432 1451 [email protected] Strategy
Small & Mid Caps Gregory YAP
(65) 6432 1450 [email protected] Technology & Manufacturing Telcos - Regional
Wilson LIEW (65) 6432 1454 [email protected] Hotel & Resort
Property & Construction James KOH (65) 6432 1431 [email protected]
Logistics Resources Consumer
Small & Mid Caps YEAK Chee Keong, CFA (65) 6433 5730 [email protected]
Healthcare Offshore & Marine Alison FOK
(65) 6433 5745 [email protected] Services
S-chips Bernard CHIN (65) 6433 5726 [email protected]
Transport (Land, Shipping & Aviation) ONG Kian Lin (65) 6432 1470 [email protected]
REITs / Property Wei Bin (65) 6432 1455 [email protected]
S-chips Small & Mid Caps
INDONESIA Katarina SETIAWAN Head of Research
(62) 21 2557 1125 [email protected] Consumer Strategy
Telcos Lucky ARIESANDI, CFA (62) 21 2557 1127 [email protected]
Base metals Coal
Oil & Gas Rahmi MARINA (62) 21 2557 1128 [email protected]
Banking Multifinance Pandu ANUGRAH
(62) 21 2557 1137 [email protected] Auto Heavy equipment
Plantation Toll road Adi N. WICAKSONO
(62) 21 2557 1130 [email protected] Generalist Anthony YUNUS
(62) 21 2557 1134 [email protected] Cement Infrastructure
Property Arwani PRANADJAYA
(62) 21 2557 1129 [email protected] Technicals
PHILIPPINES Luz LORENZO Head of Research
(63) 2 849 8836 [email protected] Strategy Laura DY-LIACCO
(63) 2 849 8840 [email protected] Utilities Conglomerates
Telcos Lovell SARREAL (63) 2 849 8841 [email protected]
Consumer Media Cement
Kenneth NERECINA (63) 2 849 8839 [email protected] Conglomerates
Property Ports/ Logistics
Katherine TAN (63) 2 849 8843 [email protected] Banks
Construction Ramon ADVIENTO (63) 2 849 8842 [email protected]
Mining
THAILAND Mayuree CHOWVIKRAN Head of Research
(66) 2658 6300 ext 1440 [email protected]
Strategy
Maria BRENDA SANCHEZ LAPIZ Co-Head of Research
Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected]
Consumer/ Big Caps
Andrew STOTZ Strategist
(66) 2658 6300 ext 5091 [email protected]
Suttatip PEERASUB
(66) 2658 6300 ext 1430 [email protected] Media Commerce
Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected]
Energy Petrochem Termporn TANTIVIVAT
(66) 2658 6300 ext 1520 [email protected] Property Woraphon WIROONSRI
(66) 2658 6300 ext 1560 [email protected] Banking & Finance Jaroonpan WATTANAWONG
(66) 2658 6300 ext 1404 [email protected] Transportation Small cap.
Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] Electronics
Pongrat RATANATAVANANANDA (66) 2658 6300 ext 1398 [email protected]
Services/ Small Caps
VIETNAM Michael KOKALARI,CFA Head of Research
(84) 838 38 66 47 [email protected] Strategy Nguyen Thi Ngan Tuyen
(84) 844 55 58 88 x 8081 [email protected] Food and Beverage § Oil and Gas
Ngo Bich Van (84) 844 55 58 88 x 8084 [email protected]
Banking Trinh Thi Ngoc Diep (84) 844 55 58 88 x 8242 [email protected]
Technololy Utilities Construction
Dang Thi Kim Thoa (84) 844 55 58 88 x 8083 [email protected] Consumer
Nguyen Trung Hoa +84 844 55 58 88 x 8088 [email protected] Steel
Sugar Resources
17 October 2012 Page 37 of 39
IGB REIT 17 October 2011
Page 1 of 2
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security‟s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction‟s stock exchange in the equity analysis. Accordingly, investors‟ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may rec eive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available t o us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.
This report is prepared for the use of MKE‟s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the pri or written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.
US
This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investment s to you under relevant legislation and regulations.
UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
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IGB REIT 17 October 2011
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DISCLOSURES
Legal Entities Disclosures
Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission.Philippines:MATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Kim Eng Vietnam Securities Company (“KEVS”) (License Number: 71/UBCK-GP) is licensed under the StateSecuritiesCommission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.
Singapore: As of 17 October 2012, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of 17 October 2012, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment.
OTHERS
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst‟s personal views about any and all of the subject securities or issuers; and no part of the research analyst‟s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings
Maybank Kim Eng Research uses the following rating system:
BUY Total return is expected to be above 10% in the next 12 months (excluding dividends)
HOLD Total return is expected to be between -10% to +10% in the next 12 months (excluding dividends)
SELL Total return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investm ent ratings are only
applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investm ent ratings
as we do not actively follow developments in these companies.
Some common terms abbreviated in this report (where they appear):
Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings
BV = Book Value FV = Fair Value PEG = PE Ratio To Growth
CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio
Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter
CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset
DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share
NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds
EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital
EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year
EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date
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IGB REIT 17 October 2011
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EV = Enterprise Value PBT = Profit Before Tax
Malaysia
Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad)
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London
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New York
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Stockbroking Business:
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Fax: (603) 2282 5136
Hong Kong
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Indonesia
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India
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Philippines
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Tel: (63) 2 849 8888 Fax: (63) 2 848 5738
Thailand
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Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan,
Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)
Vietnam
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Kim Eng Vietnam Securities Company 1st Floor, 255 Tran Hung Dao St.
District 1 Ho Chi Minh City, Vietnam Tel : (84) 838 38 66 36
Fax : (84) 838 38 66 39
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Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686
Fax: (966) 26068787
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Connie TAN
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North Asia Sales Trading
Eddie LAU
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