Review

• KIP REIT's 1HFY24 realised a net profit of RM21.0mn (+12.5% YoY), which came within expectations, accounting for 46% of our full-year forecasts. We anticipate KIP REIT results to be stronger in 2H, underpinned by maiden earnings from the acquisition of KIPMall Kota Warisan, which is expected to be completed in 3QFY24.

• 2QFY24 DPU stood at 1.55sen/unit, bringing 1HFY24 DPU to 3.1sen/unit (+6.9% YoY). Based on the last closing price, this works out to an annualised dividend yield of 7.0%.

• YoY, KIP REIT’s 1HFY24 realised net profit increased by 12.5%, alongside a 13.7% rise in revenue. The stellar performance was primarily attributable to 1) steady growth in the retail segment and 2) lease income from the three newly acquired industrial properties in Klang.

• QoQ, KIP REIT’s 2QFY24 realised net profit grew 2.5% to RM10.6mn on the back of 1.1% growth in revenue. Higher occupancy rates and reduced property expenses mainly drove the sequential improvement.

Impact

• Maintain earnings forecasts.

Outlook

• Management is optimistic about KIP REIT’s prospects, citing the strong performance of the existing property portfolio and continuous efforts to improve leasing and operational initiatives. The anticipated finalisation of the KIPMall Kota Warisan acquisition is poised to enhance KIP REIT's future performance. Furthermore, the management is dedicated to prudent capital management, aiming to deliver sustainable returns to unitholders, and actively exploring growth opportunities in both retail and industrial assets.

Valuation

• We maintain our Buy recommendation on KIP REIT with an unchanged TP of RM1.08, based on a target yield of 6.75% to our CY24 DPU projection of 7.3sen/unit.

Source: TA Research - 30 Jan 2024