KUALA LUMPUR (Dec 22): KIP Real Estate Investment Trust (KIP REIT), a wet market and conventional shopping centre operator, is seeking to raise as much as RM234.15 million via a Main Market listing on Bursa Malaysia, according to its draft prospectus filed with the Securities Commission Malaysia.

The sum is derived from the indicative issue price of RM1 per share for 234.15 million offer units in its initial public offering (IPO), of which 220.65 million units are marked for institutional and selected investors — including bumiputera — with the remaining 13.5 million being retail offerings.

The REIT principally invests in retail real estate and its initial portfolio will comprise KiP Mart Tampoi, KiP Mall Bangi, KiP Mart Kota Tinggi, KiP Mart Melaka, KiP Mart Masai and KiP Mart Lavender Senawang.

KiP Marts are a hybrid between a traditional wet market and a conventional shopping centre, it said, while the KiP Mall is a neighbourhood conventional shopping mall, all of which cater to lower- to middle-income customers.

On Nov 4, 2016, the REIT’s trustee, Pacific Trustees Bhd, on behalf of KIP REIT, inked agreements to purchase the KiP Marts above for about RM580.3 million. Hence, the majority of proceeds raised — 95.7% or RM222.14 million — will mainly be used to pay for the acquisitions, while the remainder will be allocated to pare down its financing facilities (RM1.1 million) and to defray listing expenses (RM10.91 million).

“In the event that the actual proceeds raised are higher than the estimated amount of approximately RM234.2 million, the amount used for the acquisitions will be correspondingly higher,” it said.

“As a result, the amount of proceeds to be drawn from the financing facilities for the acquisitions will be correspondingly lower in view that the cash consideration component of the acquisitions has been fixed at approximately RM309.1 million,” it added.

“On the listing date, KIP REIT is expected to have debt of approximately RM85.9 million (net of estimated transaction costs of RM1.1 million), representing approximately 14.8% of its estimated total asset value,” it shared.

In terms of portfolio performance, KIP REIT said its net property income (NPI) grew to RM42.24 million in the financial year ended June 30, 2016 (FY2016), from RM32.76 million in FY2014. Though it forecasts that NPI will fall 35% to RM27.62 million in FY2017, it expects NPI to bounce back to RM41.09 million in FY2018.

The bearish outlook for FY2017 could be because some 540 tenancies that are occupying 42.3% of its total lettable area — which contribute some 47.3% of its gross rental income — will be expiring during the financial year.

The promoters of the IPO are its managing director and non-independent executive director Datuk Chew Lak Seong, and non-independent executive director Datuk Ong Kook Liong. The two have an indirect stake of 53.7% in the REIT, with a 0.1% direct stake. Both are founders of KIP Group of Companies.

CIMB Investment Bank Bhd is the REIT’s principal adviser, underwriter and book runner for the IPO.

This article first appeared in The Edge Financial Daily, on Dec 22, 2016. Subscribe to The Edge Financial Daily here.

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