Summary

• Earnings above expectations. IGBCR registered a 3QFY26 core PAT of RM32.4m, bringing 9MFY26 core PAT to RM95.4m, accounting for 83.7% and 79.8% of our and consensus full-year estimates, respectively. Core earnings exclude a RM3.1m non-cash fair value loss in 3QFY26 and a net fair value gain of RM0.8m in 1HFY26. The earnings beat was driven by higher occupancy and rental rates, alongside lower finance costs.
   
• YoY. IGBCR’s 3QFY26 core PAT rose 36.4% YoY to RM32.4m, driven by higher occupancy and average rental rates. Revenue rose 14.3% YoY to RM73.4m, while NPI jumped 21.6% YoY to RM45.8m, lifting the NPI margin to 62.4% (from 58.6%). Meanwhile, finance costs declined 12.5% YoY from RM10.0m to RM8.7m, providing additional earnings uplift.
   
• QoQ. Revenue rose 3.0% QoQ to RM73.4m on higher rental income as occupancy improved to 95.0% (from 94.1%). NPI grew at a slower pace of 1.5% QoQ to RM45.8m as property operating expenses climbed 5.6% QoQ, led by higher utility costs. Core PAT edged up 1.9% QoQ to RM32.4m from RM31.8m.
   
• Income distribution. RM33.3m was declared as income distribution for 3QFY26, implying a DPU of 1.37 sen per unit (vs RM24.9m in 3QFY25, implying a DPU of 1.03 sen), payable on 30 November 2026. Cumulative 9MFY26 DPU stands at 4.05 sen, as compared to 3.13 sen in 9MFY25.
   
• Portfolio occupancy rate increased to 95.0%. Mid Valley City’s occupancy rate rose from 96.2% in 3QFY25 to 98.8% in 3QFY26, while KL City improved from 84.1% to 88.6% over the same period. Meanwhile, the overall portfolio’s occupancy rate increased from 91.7% to 95.0% during the same period.
   
• Average rental rate increased as well. The average rental rate for Mid Valley City increased from RM6.95/sqft in 3QFY25 to RM7.14/sqft in 3QFY26. Simultaneously, the average rental rate for KL City also increased from RM5.72/sqft to RM5.99/sqft. On a portfolio basis, the average monthly rental rate increased from RM6.53/sqft to RM6.74/sqft.
   
• Weighted average lease expiry (WALE) stood at 1.85 years. As at 3QFY26, IGBCR’s WALE stood at 1.85 years, with the overall portfolio tenancy expiry profile ranging from 1% to 44% over FY26-29. Tenant retention remained strong, with 116 out of 135 tenancies renewed, representing a renewal rate of ~91% by net lettable area. 
   
• Gearing ratio remains conservative at 26.5%. Total borrowings stood at RM889.8m as at 3QFY26 (vs RM881.3m in 2QFY26), bringing the gearing ratio to 26.5%. The REIT remains well-protected from interest rate volatility as 97% of its debt is on fixed rates.
   
• Outlook. We maintain a positive outlook on IGBCR as it continues to benefit from the “flight to quality” trend, supported by its Green Building Index (GBI) certification across all 10 commercial buildings and well-located portfolio serving a highly diversified, corporate based tenants across multiple sectors. Meanwhile, with the portfolio occupancy rising to 95.0% and Mid Valley City nearing full occupancy (98.8%), we see scope for further positive rental reversions, underpinned by management’s ongoing AEIs (e.g. lobby modernisation, smart lighting and chiller plant metering upgrades).

Valuation & Recommendation

• Forecast. Following the results beat, we raise our FY26-28f core PAT by 6.3%/8.7%/11.6% to RM121.2m/131.0m/142.0m, from RM114.0m/120.5m/127.2m respectively.
   
• Maintain BUY with a higher TP of RM0.89. We maintain our BUY recommendation with a higher target price of RM0.89 (from RM0.76), based on a targeted distribution yield of 6.5% applied to our FY27f DPU of 5.8 sen.
  
  We continue to like IGBCR for its rising occupancy and rental rates, strong tenant retention and declining financing costs. We view the current price level as an attractive entry point for investors, offering compelling dividend yields of between 8.9%-10.4% over FY26-28.
   
• Downside risks. Risks to our recommendation include (i) reduction in occupancy rate due to oversupply in the office market and structural shifts in workplace demand, (ii) downward pressure on rental reversion amid economic slowdown, and (iii) rising electricity tariffs weighing on operating margins.