KIP-REIT in pursuit of high-quality investments

PETALING JAYA: Analysts remain optimistic about KIP Real Estate Investment Trust’s (KIP-REIT) prospects, following the strong performance of its property portfolio and efforts to improve leasing and operational strategies.

According to TA Research, KIP-REIT is pursuing high-quality investments as the group reinforces its belief in sustaining stable performance throughout the financial year 2024 (FY24).

“It is committed to prudent capital management to deliver sustainable distribution per unit to unitholders and will explore growth opportunities in the retail as well as industrial sectors,” the research house said.

It was noted that KIP-REIT’s distribution per unit for the fourth quarter of FY23 stood at 1.75 sen per unit, an 8.8% drop year-on-year, bringing the whole FY23 distribution per unit to 6.2 sen per unit.

The group stated that the decline was caused by a 15% increase in outstanding units as a result of three private placements completed during the period under review.

TA Research said in a statement that KIP-REIT’s realised net profit fell short of expectations with an increase of 9.5% year-on-year to RM39.5mil, accounting for the research house’s 94% of its full-year forecast.This was alongside a rise of 13.6% year-on-year in its revenue to RM83.8mil for FY23.

“The improved performance was mainly due to a low base in FY22 following to the full movement control order of the Covid-19 pandemic, steady growth in the retail segment and a lease income from the three newly acquired industrial properties in Klang, Selangor worth RM1.8mil,” it said.

TA Research also said the company saw a drop in its net property income margin by 2.8% points to 74.2%, due to higher property expenses such as utilities, reimbursement costs and building maintenance.

“Notably, FY23 net property income aligned with 98% of our forecasts,” said TA Research in a report.

On a quarterly basis, KIP-REIT’s fourth quarter FY23 recorded a 2.7% decrease in its realised net profit to RM10.2mil, despite a 2.6% increase in revenue as the net income drop was also primarily attributable to higher property expenses.

TA Research maintained a “buy” call on KIP-REIT with a reduced target price of RM1.04 per share, based on an unchanged calendar year 2024 target yield of 6.75%.

The research house said it would also be reducing its earnings forecast for FY24 and FY25 by 4%, as well as a decrease in distributions per unit projection by approximately 1%.

TA Research pointed out that it has yet to incorporate the contribution from KIP Mall Kota Warisan and the effect of a private placement into its earnings model, which is pending completion of the exercise that is scheduled for the end of 2023.