RAM Ratings affirms rating of KIP REIT Capital’s RM210 mil Class A 2019-Issue 1 MTN

Published on 26 Jun 2023.

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RAM Ratings has affirmed the AAA/Stable rating of the RM210 mil Class A 2019-Issue 1 Medium Term Notes (MTN) (Class A Notes) under KIP REIT Capital Sdn Bhd’s RM2.0 bil Perpetual MTN Programme. The underlying collateral for the Class A Notes comprises KIPMall Tampoi, KIPMall Masai and KIPMall Bangi (KMB) (or KIPMalls) and AEON Mall Kinta City (AMKC) (collectively, the Properties).

The rating action reflects the Properties’ strong credit attributes supported by its diversified tenant base, seasoned lease profile and relative exposure to essential trade services contributing to its resilient performance. The transaction also benefits from its underlying diversified portfolio, strong structure and cash flow governance as well as sturdy liquidity position. Post pandemic, the Properties’ annualised combined net operating cash flow (NCF) for 9M FY Jun 2023 rebounded to a level consistent with our sustainable cash flow assessment of RM50 mil, two years ahead of our earlier expectations. Its sizeable exposure to AMKC (35% by NCF and market value) – with its master tenancy due for renewal in September 2025 – remains a moderating factor. 

Based on the Properties’ adjusted valuation of RM570.82 mil (market value as at 30 June 2022: RM679 mil), the resultant loan to value ratio of 36.79% and stressed debt service coverage of 2.82 times for the Class A Notes remain supportive of its rating. 

Driven by strong lease renewal rates of 78%-93% (by rental income) and positive rental reversion rates of 4.5%-6.1% in 9M FY Jun 2023, KIPMalls’ respective average occupancy rate and average rental rate rose to 84% and RM6.61 psf (FY Jun 2022: 79% and RM6.55 psf). Though the progress for its refurbishment exercise was delayed by the movement control order, KMB recorded a better performance following the entry of new tenants, HeroMarket and Noko (replacing Giant), in July 2022 and increased footfall as its reconfiguration efforts nears completion, expected in September 2023.  

Looking ahead, the Properties’ differentiated proposition as community-based malls with a prominent fresh market trade segment, and the sponsor’s current asset enhancement initiatives should help contain current inflationary pressures and sustain the Properties’ NCF at the level assessed.
A wholly owned subsidiary of KIP Real Estate Investment Trust (the REIT), KIP REIT Capital was set up solely as a funding conduit for the MTN Programme, to be secured against properties owned by the REIT. 


Analytical contacts
Chu Jia Ying
(603) 3385 2519

Tan Han Nee
(603) 3385 2529


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2023 by RAM Rating Services Berhad

Rating Rationale

Ratings on KIP REIT Capital Sdn Bhd (Issue 1)