IGB Bhd is expecting a positive turn in its hotel sector, largely driven by the reopening of its 390-room Boulevard hotel nestled in Mid Valley City, scheduled for July 2023.
The company’s hotel segment will also be boosted by a year-round contribution from St. Giles Southkey hotel in Johor Bahru, which commenced operations on August 31, 2022. The St. Giles Southkey is part of the Mid Valley Southkey, which features a shopping mall, an exhibition hall, and commercial towers. With 575 chic, spacious rooms, the hotel is managed locally by Cititel Hotel Management Sdn Bhd and is affiliated with the UK-based St. Giles Hotels group.
IGB’s fiscal year 2023 (FY23) began promisingly, posting a net profit of RM56.1 million, up 31.2% year on year (y-o-y) and more than double quarter on quarter (q-o-q) in the first quarter. This falls in line with Public Investment Bank’s (PublicInvest) and consensus estimates. The group’s first quarter 2023 (1QFY23) net profit represented about 24% and 26% of the company’s and consensus’ annual projections, respectively.
The group saw a 37% y-o-y revenue increase, largely due to improved performance across most of its business categories. This, in turn, led to a 30% y-o-y hike in its pre-tax profit, amounting to RM135 million.
Notably, the hotel segment’s revenue surged by over 100% y-o-y to RM58.5 million, thanks to considerable improvements in room occupancy and rate during the current quarter.
IGB boasts a 53.4% stake in IGB Real Estate Investment Trust (REIT) and 52.8% in IGB Commercial REIT. It owns a portfolio of hotels and land banks primarily in Malaysia, with some holdings in Australia and the UK.
The group’s retail assets revenue, facilitated through IGB REIT, rose 15.5% y-o-y to RM154.6 million, largely due to increased tenant retail sales and higher average rents recorded during the quarter. Key properties under IGB REIT include the Mid Valley Megamall and The Gardens Mall in Kuala Lumpur.
According to PublicInvest, both assets maintain full occupancy, with rental rates beginning to align with growing tenant sales.
Furthermore, IGB’s share price has experienced an upward trend of roughly 80% from RM1.69 in September 2021 to a high of RM3.10 in March 2023. Despite losing some ground in recent weeks, it remains up about 30% year to date. However, with the current stock price exceeding PublicInvest’s target price, IGB has been downgraded from ‘Outperform’ to ‘Neutral’ with an unchanged target price of RM2.70.