KIP REIT expects to raise RM234m from IPO

KUALA LUMPUR: KIP Real Estate Investment Trust (KIP REIT), which is en route to a listing on the Main Market of Bursa Malaysia Securities, is expected to raise RM234.2 million from its initial public offering (IPO).
The proceeds will be used mainly for the acquisitions of KIP REIT’s initial portfolio consisting of five KiP Marts – in Tampoi, Kota Tinggi, Masai, Senawang and Malacca – as well as a neighbourhood retail centre known as KiP Mall in Bangi. The assets are valued at RM580 million and have an average occupancy rate of 85% and above, with a yield of 6.54%.
KIP REIT’s IPO of 234.15 million offer units comprises the issuance of 220.65 million offer units (43.7%) for institutional and selected investors at a price to be determined by way of bookbuilding and 13.5 million offer units (2.7%) for retail investors at RM1 per unit.
Based on the enlarged share capital of 505.3 million units, the total market capitalisation of KIP REIT upon listing is estimated to be RM505.3 million.
It is the intention of KIP REIT’s manager KIP REIT Management Sdn Bhd to distribute up to 100% of KIP REIT’s distributable income for FY17 and FY18 and thereafter at least 90% of KIP REIT’s distributable income on a half-yearly basis.
KIP REIT Management CEO Lim Han Gie said its focus on hybrid (traditional wet market and conventional shopping centre) community-centric retail centres that cater to communities’ need for fresh produce and daily essentials, coupled with its diversified tenant base and strategic geographical locations in growing catchment areas, are what make KIP REIT attractive.
“KiP Mart is differentiated from the normal retail markets. We focus on the daily essentials. Although many people think the retail market is softening, our focus is on essentials and necessities, so we’re not that affected,” Lim said after launching the prospectus last Friday.
He said the targets of KIP REIT could be achieved through the optimisation and asset enhancement by the management. The manager has the “right of first refusal” to expand KIP REIT in the future, through the acquisition of other KiP Marts in Johor, Penang, Pahang, Kedah, Selangor and Negri Sembilan.
KIP REIT’s gross rental income for the past three financial years has been growing steadily from RM48.30 million in 2014, RM51.63 million in 2015 and RM53.00 million in 2016. It posted a net property income of RM32.76 million in 2014, RM38.27 million in 2015 and RM42.24 million in 2016.
Upon listing, KIP REIT’s debt-to-asset ratio will be 14.8%, which is below the average Malaysian REIT of 32% as at Sept 30, 2016. This will allow KIP REIT to undertake borrowings for future acquisitions or asset enhancement.
KIP REIT’s retail offering will close on Jan 16. It is expected to list on Feb 6.