KIP REIT could offer above-average yield of 8%, Apex Securities says in initiating coverage

• KIP REIT owns 10 retail malls and four industrial assets worth RM1.5 billion combined, with all of its properties fully or nearly fully occupied. The average occupancy rate across its portfolio was 97.8% at the end of June.

KUALA LUMPUR (Aug 6): While shopping mall owners grapple with rising costs, KIP REIT (KL:KIPREIT) could stay resilient and offer an above-average distribution yield of 8%, according to Apex Securities.

Apex Securities rated KIP REIT at a "buy" call and target price of RM1.07 in its initiation note, joining two other research houses covering the real estate investment trust. The target yield is well above its peers’ average of under 6% over the next three financial years ending in June, the house noted.

“The premium reflects compensation for KIP REIT’s lower asset quality and exposure to non-prime retail segments, which carry higher risk but offer more attractive returns,” Apex Securities said.

KIP REIT owns 10 retail malls and four industrial assets worth RM1.5 billion combined, with all of its properties fully or nearly fully occupied. The average occupancy rate across its portfolio was 97.8% at the end of June.

Malaysian shopping malls are now under pressure from higher electricity tariffs, increasing fees tied to licensing and regulatory compliance and the expansion of sales and service tax to include rental and leasing services, according to the Malaysia Shopping Malls Association.

“Although rising costs may pressure tenants, KIP REIT’s necessity-driven, community-focused malls are expected to maintain steady demand and resilient tenant performance, with cost increases likely passed on to end consumers,” Apex Securities said.

KIP REIT also benefits from off-peak consumption patterns and the mid-sized nature of its mall, which is not connected to a high-voltage supply, further mitigating potential cost increases, the house noted.

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