KIP-REIT sets sights on RM1.5bil portfolio by 2028

PETALING JAYA: KIP Real Estate Investment Trust (KIP-REIT) remains hopeful of the potential to expand its industrial-asset portfolio and secure long-term, stable tenancies, given the anticipated strong performance of the industrial sector.

In the long term, KIP-REIT’s management team has set a target of increasing the portfolio’s value to RM1.5bil over the next five years.

TA Research said following the injection of KIPMall Kota Warisan, KIP-REIT retains three right of first refusal (ROFR) assets granted by its promoters KIPMall Sungai Petani, KIPMall Desa Coalfields, and KIPMall Kuantan.

It adds that strategic initiatives are being actively pursued to nurture and enhance these assets, with plans to inject them into KIP-REIT as they mature.

TA Research’s financial year 2024 (FY24) to FY26 earnings forecasts for KIP-REIT have been adjusted upwards by 2% to 9% to reflect the earnings contribution from KIPMall Kota Warisan.

However, the FY24-FY26 earnings per unit (EPU) and distribution per unit (DPU) are only raised by 1% to 6% due to the incorporation of 12.3 million new placement units, resulting in a 2% increase in the total units issued.

Post EPU and DPU adjustments, TA Research raised KIP-REIT’s target price to RM1.08 (from RM1.04) a share. It maintains its “buy’’ call on the stock.

TA Researchsaid in the first quarter of FY24, KIP-REIT’s average portfolio occupancy rate increased to 94.1%, up from 90.9% in the corresponding quarter of the previous year.

All assets under management have maintained occupancy rates exceeding 85%, with exceptions for KIPMall Bangi at 80% and KIPMall Kota Tinggi at 84%.

It said ongoing major renovations impacted the occupancy rate at KIPMall Bangi while KIPMall Kota Tinggi experienced a decrease in occupancy due to the departure of an anchor tenant (Songmart), which previously occupied about 25% of the net lettable area and left the mall in June 2023.

However, KIP-REIT’s management has shared positive news that a new anchor tenant (Hwa Twai Supermarket) began operations in August and this is expected to raise KIPMall Kota Tinggi’s occupancy to over 90%.

By the end of the first quarter FY24, nearly 80% of tenancies due in FY24 had been renewed, showing a positive mid-single-digit rental reversion.

Consequently, management did not anticipate any notable vacancy risks for the year, the research house added.