KIP REIT: Rising costs amid inflationary pressure to hurt tenant profit margins

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KUALA LUMPUR (September 14): KIP Real Estate Investment Trust (KIP REIT) is forecasting the effects of strong inflationary pressures as rising costs hurt profit margins for its tenants, according to its executive director Valerie Ong.

“The impact is specifically on our tenants, as these costs hurt their profit margins. And these rising costs cannot be passed on to the end consumer, as people are generally more price sensitive, especially [during hard times] now,” she said at the “Invest Malaysia: Pivoting for the Future” conference on Wednesday (September 14).

“But, with the economy picking up and more people feeling confident about going out, we’re seeing quite a good improvement in footfall at our malls, as well as occupancy,” Ong added. .

Last week, the monetary policy committee of Bank Negara Malaysia raised its overnight rate (OPR) by 25 basis points (bps) to 2.5% – the third consecutive increase of 25bps OPR this year – in line with expectations of a further normalization of monetary policy, as the country’s economic growth and inflation accelerate.

On the other hand, the Managing Director of the REIT also mentioned that there are a lot of expansion plans from the tenants of the REIT, but they are facing labor issues.

“Obviously, this impacts their opening hours, as well as the operating methods. So, it’s still an unresolved issue.

“It will be a very big challenge as it will also impact the operation of our mall and I hope to see an improvement by bringing in more labor from abroad,” Ong explained.

KIP REIT is a retail-focused real estate trust with a portfolio of community-focused shopping malls strategically located across Peninsular Malaysia. The initial portfolio at listing consisted of six community-focused KIPMalls strategically located in populated suburban areas of Johor, Negeri Sembilan, Melaka and Selangor.

For the full year ended June 30, 2022 (FY22), KIP REIT’s net profit decreased from RM35.22 million to RM75.51 million, due to changes in the fair value of investment properties at course of the year.

This despite its revenue for FY22 declining to RM73.7 million from RM74.25 million, mainly due to lower promotional revenue due to restrictions on activities and events at the centre. commercial during the first two quarters and the fall in the average occupancy rate.

By Wednesday’s lunch break, shares of KIP REIT had fallen half a sen or 0.56% to 89 sen, valuing the group at RM515.27 million.

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