Research houses, Maybank Investment Bank Bhd (Maybank IB) and MIDF Amanah Investment Bank Bhd (MIDF Research), have downgraded their recommendation for IGB Real Estate Investment Trust (REIT) to HOLD and NEUTRAL respectively due to limited upside potential for its share price.

Despite the downgrading call, Maybank IB has raised its target price (TP) for IGB REIT to RM2.22 while MIDF Research maintained the TP at RM2.10.

Notwithstanding the limited upside potential, IGB REIT has reported solid performance in its third quarter of the financial year of 2024 (3Q24) with core net profit reaching RM92.7 million, marking a 4% year-on-year increase and a 5% rise compared to the previous quarter.

This brings the cumulative core net profit for the first nine months of FY24 to RM283.2 million, reflecting a 6% annual growth and fulfilling 74% of both the internal and consensus estimates for the full year.

However, IGB REIT's headline net profit for the first nine months was down 39% to RM260.7 million, impacted by negative fair value changes of RM22.5 million related to capital expenditure from reconfiguration works at Mid Valley Megamall.

A distribution per unit (DPU) of 2.68 sen has been declared for 3Q, bringing the total DPU for year-to-date to 8.2 sen.

Looking ahead, IGB REIT is poised for growth through potential acquisitions, notably the Mid Valley Southkey Mall in Johor Bahru, which is fully occupied and is expected to provide a new growth catalyst as its rental renewal is due in 2025.

With a gross gearing ratio of just 0.22 times as of the end of 3Q, IGB REIT has the financial capacity to pursue additional acquisitions in the future.

Overall, while the immediate outlook is stable, the analysts caution that the potential for significant share price appreciation may be limited in the short term.