KIP-REIT has potential to offer 8% yield

PETALING JAYA: KIP Real Estate Investment Trust (KIP-REIT) presents a “compelling investment opportunity”, given its attractive distribution yield and solid financial footing.

According to Apex Securities, KIP-REIT offers a yield of exceeding 8% for the financial years of 2026 to 2028, well above the peer average of 5.6% and the Employees Provident Fund’s 6.3% in 2025.

The investment trust is also supported by a diversified asset base, its position as a one-stop community-centric mall curator serving the mass market, high 90% distribution policy, and strong balance sheet.

As of end-June 2025, KIP-REIT’s portfolio comprised 10 retail malls and four industrial assets valued at RM1.5bil with a combined net lettable area of 2.6 million sq ft and 1,178 tenancies.

The portfolio maintained a robust average occupancy rate of 97.8%, underpinned by strong tenant relationships and footfall.

A total of four retail and three industrial assets proposed acquisitions have yet to be finalised.

Apex Securities initiated coverage on KIP-REIT with a “buy” rating, with a target price of RM1.07 per unit based on a 7% target distribution yield.

The target yield represented a 1.7-percentage-point premium over the peer average of 5.3%, which Apex Securities viewed as reasonable.

The premium reflected compensation for KIP-REIT’s lower asset quality and exposure to non-prime retail segments, which carried higher risk but offered more attractive returns, it said.

According to Apex Securities, KIP-REIT is largely shielded for the recent expansion of the sales and service tax.

Effective since July 1, 2025, an 8% service tax on rental and leasing services had been applied to commercial rentals with an annual turnover exceeding RM1mil.

“The tax is billed to tenants and remitted to Customs, so it will not directly impact KIP-REIT’s earnings,” it added.