KUALA LUMPUR: KIP Real Estate Investment Trust (REIT) posted lower net profit of RM34.05mil in the fiscal year ended June 30, 2019 due to higher borrowing costs and also higher management fees and sees a challenging second half for the retail industry.
It announced on Friday its net profit fell by 9.4% from RM37.61mil. Its revenue inched up 0.5% to RM63.06mil compared with 62.77mil.
KIP REIT said the higher borrowing costs were to finance the deposit for the proposed acquisition of Aeon Mall Kinta City and solar photovoltaic system and other advisory fees.
There were also higher management fees charged from 0.30% of total asset value (TAV) to 0.60% of TAV. This is the first increase in management fee since its IPO.
Under the trust deed, the manager of KIP REIT was entitled to charge up to 1% of the TAV.
For the fourth quarter, its net profit fell by 6.5% to RM11.52mil compared with RM12.39mil a year ago. Its revenue was marginally higher at RM16.20mil compared with RM16.13mil.
Earnings per share were 2.28 sen compared with 2.45 sen.
KIP REIT Management Sdn Bhd managing director Datuk Chew Lak Seong said KIP REIT’s portfolio of assets continued to perform well despite challenging retail market conditions for the past year.
“KIP REIT’s stable earnings is a reflection of the resiliency of our asset portfolio. We will continue to deliver growth in revenue and maintain higher than average occupancy rate with our unique proposition in the future.
“We expect the second half (of this calendar year) to remain challenging for the retail industry,” he said in the statement.
Chew said they would continue to focus on improving the overall occupancy rate and net property income by pursuing the ideal tenant mix.
KIP REIT Management would enhance the assets to ensure its properties continue to generate strong performances.
He added they would continue to look for yield-accretive assets for acquisition to expand its asset portfolio and create long term value for unitholders.
“For acquisitions in the pipeline, we are currently evaluating five ‘rights of first refusal’ properties owned privately by the KIP Group as well as third parties’ properties. The acquisition of these properties will depend on whether it meets KIP REIT’s stringent investment criteria.
As for the acquisition of AEON Mall Kinta City, which is a third-party property, he expected it to be completed in this coming quarter.
“We will also continue to scale-up our operations, and target to enlarge the total asset under management to RM1.5bil within the next five years,” he said.