Friday, July 25, 2025
FBMKLCI: 1,540.32
Sector: REIT
KIP Real Estate Investment Trust
Resilient FY25 Performance
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*
Review
- KIP REIT’S FY25 realised net profit of RM51.6mn (+14.6% YoY) was within expectations, accounting for 99.6% of our full-year forecasts.
- 4QFY25 distribution per unit (DPU) stood at 2.02 sen, bringing FY25 DPU to 6.8 sen (+2.0% YoY). This translates to an attractive dividend yield of 8.0% based on the last closing price.
- FY25 revenue rose 33.3% YoY to RM136.1mn, driven by stronger contributions from its seven existing KIP Malls and incremental income from the newly acquired DPulze Shopping Centre, TF Value Mart and Cheras Jaya industrial property.
- Despite the robust topline growth, realised net profit increased at a slower pace of 14.6% to RM51.6mn due to a 64.5% YoY surge in operating expenses, alongside significantly higher manager’s management fee (+113.7% YoY) and borrowing costs (+49.4% YoY).
- On a sequential basis, 4QFY25 realised net profit grew 5.8% QoQ to RM15.2mn, primarily benefiting from the full-quarter contribution of newly acquired Cheras Jaya Industrial property.
Impact
We maintain our earnings forecasts for now, pending further insights from the analyst briefing scheduled later today.
Outlook
- Management remains upbeat about KIP REIT’s outlook, underpinned by the solid performance of its existing property portfolio, proactive leasing strategies, and continuous operational improvements.
- The REIT continues to prioritise prudent capital management and sustainable returns to unitholders. Looking ahead, its focus on acquiring yield-accretive assets and expanding exposure in both the retail and industrial segments positions KIP REIT well for long-term value creation and to capitalise on emerging opportunities.
Valuation
We maintain our Buy recommendation on KIP REIT with an unchanged TP of RM1.17/unit, based on a target yield of 6.75%.
Table 1: Earnings Summary (RM mn)
| FYE June | FY23 | FY24 | FY25 | FY26f | FY27f |
|---|---|---|---|---|---|
| Gross Rental Income | 83.8 | 102.2 | 136.1 | 143.5 | 148.2 |
| Net Property Income | 62.2 | 77.8 | 96.8 | 113.9 | 117.6 |
| NPI Margins (%) | 74.2 | 76.2 | 71.1 | 79.3 | 79.3 |
| Core Pretax profit | 39.5 | 45.0 | 53.4 | 66.2 | 69.5 |
| Core Net Profit | 39.5 | 45.0 | 51.6 | 66.2 | 69.5 |
| Distributable Income | 38.8 | 45.6 | 52.7 | 61.6 | 64.7 |
| Core EPU (sen) | 6.5 | 7.3 | 7.1 | 8.3 | 8.7 |
| Core EPU Growth (%) | (9.0) | 11.7 | (2.1) | 15.5 | 5.0 |
| PER (x) | 13.2 | 11.8 | 12.0 | 10.3 | 9.8 |
| DPU (sen) | 6.2 | 6.7 | 6.8 | 7.7 | 8.1 |
| Div Yield (%) | 7.3 | 7.8 | 8.0 | 9.0 | 9.5 |
| ROE (%) | 6.5 | 6.7 | 6.6 | 8.0 | 8.3 |
Table 2: 4QFY25 Results Analysis (RM mn)
| FYE June | 4Q24 | 3Q25 | 4Q25 | QoQ (%) | YoY (%) | FY24 | FY25 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Gross Revenue | 32.6 | 39.5 | 39.9 | 0.9 | 22.2 | 102.2 | 136.1 | 33.3 |
| Net property income | 26.4 | 27.5 | 28.1 | 2.1 | 6.1 | 77.8 | 96.8 | 24.4 |
| Interest Income | 0.2 | 0.2 | 0.3 | 43.3 | 76.7 | 0.9 | 1.1 | 32.2 |
| Change in fair value of inv prop / El | (4.2) | (0.6) | 63.3 | >100 | >100 | (6.0) | 61.8 | >100 |
| Net investment Income | 22.4 | 27.1 | 91.6 | 237.8 | 309.7 | 72.9 | 159.7 | 119.2 |
| Finance Costs | (4.6) | (7.0) | (7.3) | 4.2 | 59.0 | (16.7) | (24.9) | 49.4 |
| Other trust expenses | (0.9) | (1.3) | (1.1) | (11.3) | 33.5 | (3.1) | (4.2) | 33.3 |
| Income before taxation | 16.0 | 13.8 | 79.3 | 473.5 | 393.9 | 45.7 | 115.1 | 151.7 |
| Net profit | 16.0 | 13.8 | 79.3 | 473.5 | 393.9 | 47.3 | 115.1 | 143.4 |
| Core Net Profit | 12.0 | 14.3 | 15.2 | 5.8 | 26.5 | 45.0 | 51.6 | 14.6 |
| Income available for distribution | 13.5 | 14.2 | 15.7 | 10.7 | 16.3 | 45.6 | 52.7 | 15.5 |
| EPU (sen) | 1.5 | 1.7 | 1.9 | 11.0 | 31.9 | 7.3 | 7.1 | (2.1) |
| DPU (sen) | 2.0 | 1.6 | 2.0 | 26.1 | 2.7 | 6.7 | 6.8 | 2.0 |
| ppt | ppt | ppt | ||||||
| NPI Margin (%) | 81.0 | 69.5 | 70.3 | 0.8 | (10.7) | 76.3 | 71.1 | (5.2) |
| Core Net Margin (%) | 36.7 | 36.3 | 38.0 | 1.8 | 1.3 | 44.0 | 37.9 | (6.2) |
Sector Recommendation Guideline
OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
BUY: Total return of the stock exceeds 12%.
HOLD: Total return of the stock is within the range of 7% to 12%.
SELL: Total return of the stock is lower than 7%.
Not Rated: The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
| Environmental | Social | Governance | Average | |
|---|---|---|---|---|
| Scoring | ★★★ | ★★★ | ★★★ | ★★★ |
| Remark | It has implemented some green initiatives to reduce carbon emission. | Low exposure to social risks given that the sector is not labour-intensive. | Adequate transparency practices to ensure stakeholder engagement and management efficiency. |
- ★★★★★ (≥80%):
- Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. (+5% premium to target price)
- ★★★★ (60-79%):
- Above adequate integration of ESG factors into most aspects of operations, management and future directions. (+3% premium to target price)
- ★★★ (40-59%):
- Adequate integration of ESG factors into operations, management and future directions. (No changes to target price)
- ★★ (20-39%):
- Have some integration of ESG factors in operations and management but are insufficient. (-3% discount to target price)
- ★ (<20%):
- Minimal or no integration of ESG factors in operations and management. (-5% discount to target price)
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
As of Friday, July 25, 2025, the analyst, Thiam Chiann Wen, who prepared this report, has interest in the following securities covered in this report: (a) nil
