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Saturday, 14 January 2017

(The Star) Is now the right time for KIP REIT to list?

Being possibly the first real estate investment trust (REIT) to be listed on Bursa Malaysia’s Main Market this year, the lingering concern is whether KIP REIT has made a wrong move at a wrong time.
Outlook from the market pundits and analysts indicate a lacklustre real estate market moving forward, particularly within the commercial segment, only to be further dampened by weak consumer sentiment.
“As long as we are fundamentally ready to be listed, any time is the right time,” says KIP REIT Management Sdn Bhd CEO Lim Han Gie.
“While it is a pre-conceived notion that retail market will be negatively affected in challenging economic conditions, outlets such as ours which are predominantly occupied by vendors and traders who provide basic necessity items such as food and other household items, will only see minimal impact,” he says.
The investment trust’s portfolio will focus on hybrid community-centric retail centres. Its initial public offering (IPO) is anticipated to raise at least RM234mil. Analysts say this is rather small as most REITs usually have a larger market capitalisation (market cap) or asset size.
Tower REIT has a market cap of about RM300mil, Altrium REIT about RM130mil, although they may not be a good comparison. Out of 17 MREIT counters, 10 of them have market cap of RM1bil and above, the largest being KLCC REIT with a market cap of nearly RM14bil.
On listing, the bulk of the IPO proceeds would be used purchase property assets consisting of five KiP Marts located in Tampoi, Kota Tinggi, Masai, Senawang and Malacca, and a neighbourhood retail centre KiP Mall in Bangi.
The fact that KIP REIT forecasts a distribution yield of 6.54% in 2017, which is above the average market yield of 5.8%, shows its optimistic outlook on the REIT sector.
KIP REIT is expected to post revenue of RM44mil for the eight-month financial period ending June 30, 2017. As for FY18, the total revenue is forecast to hit RM68mil.

The investment trust also plans to enhance assets within the next two years, whereby it upgrades its infrastructure in terms of its physical building, design and space. This will contribute the REIT’s growth. It also wants to expand to other states.