PETALING JAYA: KIP Real Estate Investment Trust
(KIP-REIT) has growth potential despite increased operating costs.
According to TA Research, KIP-REIT’s outlook remains positive as the trust has made several strategic acquisitions this year including DPulze Shopping Centre in Cyberjaya, land in Gerik, Perak currently leased to TF Value Mart and another four industrial properties, with a total purchase consideration of RM433.1mil.
To partially fund the acquisition of DPulze, KIP-REIT plans to undertake a placement of 180 million new units, raising up to RM172.3mil.
“We are optimistic about these acquisitions, as they align with KIP-REIT’s strategy to expand operations and increase total assets under management from the current RM1.06bil to RM2bil within the next three years,” the research firm noted.
While the acquisitions of DPulze Shopping Centre and TF Value Mart are both expected to be completed by the first quarter of next year (1Q25), the industrial property acquisitions are anticipated to conclude between June 2025 and the first half of 2026.
TA Research said KIP-REIT remains optimistic about its prospects, citing solid performance from the existing property portfolio, ongoing leasing and operational improvements.
Additionally, it said KIP-REIT is committed to disciplined capital management and aims to deliver sustainable returns to unitholders.
“With a focus on acquiring accretive assets and exploring growth opportunities in both the retail and industrial sectors, KIP-REIT believes it is well-positioned to achieve long-term value and capitalise on emerging opportunities,” it added.
TA Research made no changes to the company’s earnings forecasts.
Consequently, the research house has maintained a “buy” recommendation on KIP-REIT with an unchanged target price of RM1.15 a share.
For the first quarter ended Sept 30, 2024 of financial year 2025 (1Q25), KIP-REIT reported a 3% decrease in its net profit to RM10mil from RM10.39mil in 1Q24, owing to higher operating expenses, management fees and borrowing costs.
However, TA Research noted that this performance was within expectations, accounting for 21% of its full-year forecasts.
TA Research also highlighted that KIP-REIT’s management fees saw an 84% year-on-year (y-o-y) increase, while borrowing costs rose by 34% y-o-y.
The increase in borrowing costs was primarily due to loan drawdowns for deposit payments related to the aforementioned acquisitions.
The rise in management fees was driven by higher charges from service providers, trustees and consultants, along with the additional manpower requirements for acquisition activities, which also contributed to the increase in operating costs.
KIP-REIT’s revenue for 1Q25 rose by 19.4% y-o-y to RM26.7mil, driven by a 19% increase in the retail segment, which accounted for 94% of total revenue.
This growth was primarily attributed to higher occupancy rates across retail properties.
The industrial segment also showed strong performance, with revenue increasing by 23.1% y-o-y, further contributing to its top line.
