KUALA LUMPUR (Aug 27): IGB Bhd reported a 20% fall in its net profit to RM32.86 million for the second quarter ended June 30, 2019, from RM41.27 million in the previous year’s corresponding quarter, dragged by lower contribution from its hotel division.

This is despite revenue rising 8% year-on-year to RM317.06 million from RM293.5 million amid higher contribution from the property development and property investment-retail divisions, its stock exchange filing today showed.

The group’s property investment–retail division, represented by IGB Real Estate Investment Trust (IGB REIT), posted higher net property income of RM98.5 million, up 9% from the previous year. As for its property investment–commercial division, average occupancy rates exceeded 75%, with average rental rates at RM6 psf, which was comparable to the previous year.

The property development division, on the other hand, saw higher revenue recognition of RM22.1 million versus RM20.3 million in the previous year, due to higher recognition of percentage of completion in respect of the Stonor 3 development.

However, the hotel division saw a 12% decline in revenue to RM62.7 million amid lower average occupancy rates and average room rates across a majority of the hotels owned by the group.

For the first half of its financial year, net profit increased 9% to RM82.31 million from RM75.35 million a year earlier, while revenue rose 11% to RM650.82 million from RM587.69 million.

“The property investment segment will be more challenging in the near term with the scheduled increase in supply of new retail space and slower demand for office space in Kuala Lumpur.

“However, with the prime location of the group’s retail malls and office buildings, the board expects contribution from this segment to be satisfactory,” said IGB, adding its Mid Valley Southpoint offices, which had obtained their certificate of occupation in July last year, are expected to contribute positively to its property investment business.

Similarly, its property development segment is expected to continue to face challenging conditions this year, it said.

As for its hotel division, IGB said it continues to see lower average occupancy rates and room rates in its hotels and hopes the government’s efforts to promote tourism will contribute positively to its business.

IGB shares fell 3 sen or 1.08% to RM2.75 today, giving it a market capitalisation of RM1.9 billion.