vested
IGB’s new commercial REIT plan stirs excitementby Syahirah Syed Jaafar
KUALA LUMPUR: IGB Bhd’s announcement that it is going to spin-off its commercial properties into a real estate investment trust (REIT) is a pleasant surprise and marks a step closer to realise the group’s fair value, analysts say.
Following last Thursday’s announcement, whereby IGB said the assets will comprise of nine office buildings spread over Mid Valley City and those along Jalan Tun Razak, IGB shares jumped 39 sen or 14.4% to close at a high of RM3.09, its highest since mid-February last year.
Kok Chiew Sia, a senior analyst from Singapore-based Pangolin Investment Management, whose fund
Pangolin Asia Fund owns 3.03% in IGB Bhd since 2017, said they were pleasantly surprised by the news as a shareholder.
Kok noted that despite the stock’s closing price last Friday, IGB is still trading at a
75% discount to its fair value.
Public Investment Bank estimates that the commercial assets could be worth in excess of RM3 billion. “Assuming IGB is keeping a 51% stake, the listing could monetise at least RM1.5 billion for shareholders,” it said in a note last Friday. IGB currently has a 52.92% stake in IGB REIT.
Public Investment Bank also upgraded IGB to “outperform” from “neutral”, with a revised target price of RM4.70.
Kok, similarly, thinks the new REIT’s portfolio could be worth around the same amount.
She said during the privatisation of IGB Corp in 2017 by IGB Bhd (previously Goldis Bhd), the independent adviser at the time, Kenanga Investment, had appraised some of the major properties in IGB Group.
And five out of nine properties to be spun-off into the commercial REIT were valued at RM2.7 billion at the time. These are: The Gardens South Tower, The Gardens North Tower, Menara Southpoint, Menara Tan & Tan and G Tower.
“If the value still holds and by adding the other four properties into the same basket, we reckon the REIT portfolio could be worth about RM3 billion or more,” said Kok.
“However, we noticed that there are three commercial assets being excluded in this proposal, perhaps these are reserved for later injection,” she said. The three properties not included in the list, she said, are
Hampshire Place, Plaza Permata and The Ampwalk.According to Kok, IGB never revalued its assets, with the last revaluation date going back as far back as 1999 (based on its 2018 annual report).
“We think IGB shares are worth as much as
RM12 per share if we are to revalue its properties. This is equivalent to a market capitalisation of US$2 billion,” she said.
Source: The Edge
https://www.theedgemarkets.com/article/ ... excitement
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