TA Research said KIP-REIT’s realised net profit in the financial year 2022 (ended June 30) of RM36mil was within its expectations, despite it being lower by 0.1% compared with the last financial year. This valuation excluded fair value gains on investment properties amounting to RM39.5mil.
PETALING JAYA: KIP Real Estate Investment Trust
(KIP-REIT) is projected to sustain growth in earnings in financial year 2023 (FY23) on higher occupancy rates and average rental rates at its properties, while risks to higher finance costs remained contained.
TA Research said the REIT’s manager said the increase in the recent overnight policy rate (OPR) will have minimal impact on distribution per unit (DPU) as 68% of its borrowings are based on fixed-rate financing. The REIT also has low need to refinance.
Nevertheless, TA Research estimated the REIT will likely see a minimal drop in net profits of RM250,000 from every 25-basis-point hike in interest rates.
TA Research said KIP-REIT’s realised net profit in the financial year 2022 (ended June 30) of RM36mil was within its expectations, despite it being lower by 0.1% compared with the last financial year. This valuation excluded fair value gains on investment properties amounting to RM39.5mil.
“The results came within expectations, accounting for 103% of our full-year earnings forecasts,” said TA Research in a report yesterday.
With the exception of KIPMall Bangi, due to the departure of a major tenant that took up 20% of the net lettable rate, occupancy rates at KIP properties are showing improvement.
Hero Supermarket filled up the vacancy at KIPMall Bangi and began operations in July 2022, which is expected to increase the mall’s occupancy rate to 70%.
“KIP’s management anticipates that KIPMall Bangi’s occupancy rate will recover to 85% by September 2023, following the completion of a major facelift,” said the research house.
Moving forward, KIP-REIT will seek to expand its existing and new asset classes, including retail, commercial and industrial assets.
KIP-REIT announced its first acquisition of industrial assets in Klang for an aggregate purchase price of RM78.7mil last month.
“That said, the target of growing its portfolio value from RM852mil to RM1.5bil by FY26 remains intact,” said the research house.
KIP-REIT intends to undertake a private placement to raise about RM80.8mil. Some RM79.8mil of the proceeds will be allocated for future yield-accretive asset acquisitions to create long-term value for unitholders.
“The first tranche is expected to be listed and quoted on the exchange this week. The second tranche (balance 48.6 million placement units) is targetted to be placed out to investors before Aug 25, 2022, being the extended deadline granted by Bursa,” said TA Research.
KIP-REIT is expected to fully finance the acquisition of industrial assets in Klang with the proceeds from the private placement.
TA Research maintained a “buy” call for KIP-REIT with a raised target price of RM1.02 (from RM1).
“Our FY23 and FY24 earnings per unit and DPU are diluted by 8% and 4%, respectively, as we assume the 20% private placement and asset acquisition to be completed in first-quarter 2023 and fourth-quarter 2023, respectively.
“We introduce FY25 DPU forecasts of 7.2 sen, representing a stable growth of 3%,” said the research house.
