PETALING JAYA: IOIPG Malaysia Real Estate Investment Trust (IOIPG-REIT), set to be the largest REIT listing in the country, has a comfortable debt buffer for acquisitions.
MBSB Research said its gearing level of 0.34 times leaves a debt headroom of about RM1.24bil to support future acquisitions and portfolio expansion.
The projected gearing is comfortably below the regulatory limit of 0.50 times under the Securities Commission’s REIT Guidelines, providing ample borrowing capacity for future growth.
However, deploying this debt headroom through acquisitions could expose the REIT to funding and execution risks, according to TA Research.
The research house noted that acquisitions may require additional debt or equity funding, while purchases at low yields or aggressive valuations could dilute distribution per unit (DPU) or increase gearing.
Higher financing costs and weaker-than-expected returns from acquisitions or asset enhancement initiatives could also weigh on earnings growth.
“Interest rates are the key sensitivity, as all borrowings are floating at Kuala Lumpur Interbank Offered Rate plus 0.75%, with no hedging disclosed.
“Each 25-basis-point increase would lower financial year 2028 (FY28) forecast DPU by about 0.12 sen, or 1.8%, and the first sukuk series matures in FY30,” TA Research explained.
Another key risk is the REIT’s concentration in IOI City Mall, which contributes about 69% of its FY27 forecast net property income, while 85.2% of its portfolio value is concentrated within IOI Resort City.
“Any weakness in occupancy, tenant sales or rental growth at these assets could therefore have a disproportionate impact on earnings,” the research house said.
Nevertheless, IOI City Mall remains the REIT’s key earnings contributor, accounting for 74.9% of FY25 NPI and 67.2% of portfolio value, underpinned by resilient tenant demand and stable tenant retention, analysts noted.
Valued at around RM5.15bil, the mall has a net lettable area of 2.6 million sq ft and an occupancy rate of 96.9%.
In addition, IOIPG-REIT’s growth strategy includes acquiring assets from its sponsor’s pipeline and third parties, focusing on properties with stable cash flows, strong locations and potential for occupancy and rental growth.
TA Research has assigned the REIT a fair value of RM1.08 per unit, representing a 12.5% upside to its initial public offering (IPO) retail price of 96 sen.
MBSB Research said growth opportunities are also supported by IOI Properties Group Bhd
’s right of first refusal over selected pipeline assets.
The REIT’s initial portfolio comprises nine assets across Malaysia, with a total appraised value of RM7.66bil.
It is anchored by IOI City Mall, complemented by hospitality and office assets.
Going forward, MBSB Research expects the REIT’s earnings to grow by 5.6%, 9.1% and 7.4% in FY27, FY28 and FY29, respectively, driven mainly by IOI City Mall’s performance.
The research house estimates FY26 core net profit at RM308mil, with growth supported by rental reversions of 5% to 10%, sustained footfall and healthy occupancy.
Meanwhile, IOIPG REIT intends to distribute at least 90% of its distributable income on a quarterly basis.
MBSB Research forecasts DPU of 5.9 sen in FY27 and 6.1 sen in FY28, implying gross yields of 6.1% and 6.4%, respectively, based on the IPO price of 96 sen.
The projected FY27 yield is above the 5.8% average gross yield of REITs under its coverage, it said.
IOIPG-REIT is scheduled to list on Nov 25, 2026.
