New IPO: IGB Reit

IGB REIT comprises of Mid Valley Megamall (retail; 1.72m sf NLA) and the Gardens Mall (retail; 0.82sf NLA) with a total appraised value of RM4.6b. Currently, Mid Valley Megamall is 99.8% occupied and the Gardens Mall is 99.7% occupied. Based on the IPO price of RM1.25, IGB REIT’s market capitalization would be RM4.3bn, making it the largest pure retail M-REIT. Following closely behind IGB REIT in terms of market capitalization size is Pavilion REIT (RM4.08b), Sunway REIT (RM4.02b) and CMMT (RM3.02b).

What are the key selling points for IGB REIT?

1. Prime asset with strategic location, huge catchment area and well connected transportation networks.
   
   
   
   
   
2. Diverse based of tenants to sustain rental income.
   
   
   
3. Low gearing provides ample room for acquisition growth. Based on IGB REIT’s Pro Forma Statement of Financial position, IGB REIT’s gearing ratio upon listing will be approximately 25.8%, which is below the average of listed MREITs of approximately 29.2% as at 31 Dec 2011. Hence, for future acquisition, IGB REIT has the flexibility to borrow additional RM1.1bn before reaching the statutory gearing level of 50%.

What's the fair value?
As shown below, different research house gave different fair value by using different method of valuations. To summarize it, the fair values estimated could give investors an upside potential of between 7.2% - 16%. Does this enough for you to consider to subscribe this IPO? Anyway, only 1% of the shares were being allocated to retail investors. Good luck.

Source: Various research report