Robinson, a major tenant of the Garden Mall, announced the closure, causing many investors to worry about IGBREIT. First of all, it must be noted that although Department Store, Supermarket, etc. occupy a large area of the mall, in fact, their rent is cheaper than that of shops.
In fact, Robinson’s annual revenue is only RM18mil, and Net property income RM14mil. In 3Q2020, IGBREIT’s Revenue is RM130.7mil and net property income is RM97.8mil. If we annualise the revenue of 3Q2020, annual revenue is RM522.8mil, net property income is RM391.2mil
So Robinson RM18mil Revenue & RM14mil net property income a year is really not worth mentioning, only accounting for 3.44% of IGBREIT annual revenue & annual net property income 3.57%
Don’t forget that there is a penalty for terminating the lease early. If we assume that IGBREIT is really so bad that it can’t find a tenant to replace it, and it doesn’t get any fines. Based on 3Q2020 performance, distributable income will drop from RM83.3mil to RM79.8mil, and DPU will drop from 2.11cent(RM) per unit to 2cent(RM) per unit.
Compared with Retail REITs revenue growth in 3Q2020, IGBREIT has the smallest drop among all Retail REITs that have released quarterly reports:
- Igbreit dropped 4.1%
- Pavreit dropped 19.44%
- CMMT dropped 16.3%
- Singapore Capitamall dropped 25.3%
In other words, IGBREIT is the most confident retail REITs that does not reduce rent, does not give Rental Rebate, and is not afraid of tenants running away.
When the stock price pulls back sharply, my view is to buy a good opportunity. Even if the DPU drops to 2cent(RM) per unit in the short term, the Dividend yield will be 5%.
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