AER said the RM80 million related-party takeover proposal is deemed “fair, reasonable and non-detrimental” to non-interested unitholders of KIP REIT.
The proposed bid, which was launched in June, involves KIP REIT taking over the one-and-a-half storey commercial centre, as well as the land piece, from Cahaya Serijaya Sdn Bhd.
The potential all-cash deal is considered a related-party transaction as both entities share the same majority shareholder and unitholder, Ong Kook Liong.
Ong is a director in Cahaya Serijaya and also the managing director of KIP REIT Management Sdn Bhd, the manager of KIP REIT.
In order to fund the acquisition partially, KIP REIT Management has proposed a RM10 million private placement of up to 12.269 million units. Another RM47.93 million, on the other hand, will be funded by bank borrowings.
The other sources of funding would come from the balance of KIP REIT’s two private placements conducted last year to fund KIPMall Bangi’s facelift.
Strong yield prospect
AER projects that the KIPMall Kota Warisan takeover is expected to yield a rate of return of 7.91% per annum, which is higher than the average yield of KIP REIT’s other retail properties of 6.54% for the financial year ended June 30, 2023.
This estimation is based on the commercial centre’s net property income of RM6.33 million over the purchase price from May 1, 2022 to April 30, 2023.
Furthermore, KIP REIT said that KIPMall Kota Warisan is relatively new, which would reduce its maintenance costs – estimated at RM800,000 annually.
“Accordingly, we recommend the non-interested unitholders to vote in favour of the ordinary resolution pertaining to the proposed acquisition that is to be tabled at the forthcoming meeting,” AER said in a circular to KIP REIT unitholders.
Following the proposal, KIP REIT’s earnings per share saw a slight rise to 10.06 sen from 10.03 sen while dividends per unit upped to 6.17 sen from 6.07 sen, excluding the one-off expenses of the proposal.
The acquired asset is estimated to account for 8.29% of KIP REIT’s enlarged total retail assets upon completion of the takeover.
KIP REIT manages a number of assets, including seven KIPMalls – located in Bangi, Tampoi, Kota Tinggi, Masai, Senawang and Melaka – as well as the Aeon Mall Kinta City in Ipoh.
It also manages three industrial properties in Pulau Indah, Port Klang.
At market close today, KIP REIT’s units were down by 0.5 sen or 0.56% at 88 sen, giving it a market capitalisation of RM533.65 million.