Review

• KIP REIT reported a realised net profit of RM36.0mn in FY22, excluding fair value gains on investment properties amounting to RM39.5mn. Results came within expectations, accounting for 103% of our full-year earnings forecasts.

• 4QFY22 DPU stood at 2.1sen/unit, bringing FY22 DPU to 6.8sen/unit (- 0.6% YoY), which was 0.55sen/ higher than our projections. Representing a payout ratio of 92%, FY22 DPU translates to a distribution yield of 7.5% based on the last closing price.

• KIP REIT’s FY22 realised net profit was 0.1% lower than last year in tandem with a 0.7% decline in revenue. The lower revenue was primarily due to lower promotional income on the back of restrictions on activities and events at the Malls for the first two quarters. Additionally, the drop in revenue was also caused by Bangi and Tampoi Malls surrendering some spaces so new tenants could move in.

• KIP REIT reported an NPI of RM14.2mn in 4QFY22, on the heels of RM19.2mn in gross revenue. This resulted in a 2.1% rise in gross revenue QoQ, driven by higher rental per square foot, reduced rental rebates, and higher promotional income collected during the quarter. However, NPI decreased by 2.1% QoQ as a result of increased maintenance charges to maintain the malls and reimbursement costs.

• KIP REIT’s total net asset value climbed by 8% YoY to RM554.6mn, largely due to an upward adjustment in the fair value of its investment properties. As a result, the latest gearing ratio (debt to asset ratio) improved from 37% a year ago to 35.2%.

Impact

• Maintain earnings forecasts pending an analyst briefing to be held later today.

Outlook

• The REIT manager will continue to manage the existing portfolio and adopt prudent capital management to provide Unitholders with a sustainable DPU. That said, the manager will keep evaluating growth opportunities in its existing and new asset classes, including retail, commercial, and industrial assets.

Valuation

• We maintain our Buy recommendation on KIP REIT with an unchanged TP of RM1.00, based on the CY23 target yield of 7%.

Source: TA Research - 29 Jul 2022