1H13 earnings in line but lower dividends
KLCCP's 1H13 core net profit of RM274.2m was in line with our estimate, at 45% of our full-year forecast. However, 1H dividend per share of 12 sen accounted for only 38% of our full-year forecast.
We cut our DDM-based target price to RM7.00 from RM8.00, after reducing our dividend payout assumptions, while keeping our WACC at 7.1%. We maintain our Outperform call, with the injection of KLCCP's other assets such as Menara Dayabumi into the REIT as a re-rating catalyst. The injection will also lower taxes and improve earnings.
1H13 dividend of 11.95 sen
In 2Q13, KLCCP declared a dividend per share of 7.45 sen, which implies a dividend payout ratio of 72% for the group. This brings total dividend per share in 1H13 to 11.95 sen, which accounts for only 38% of our full-year DPS assumption. Thus, we lower our dividend payout assumption for the group to 85% from 95%. Our initial dividend payout assumption was based on the premise that the group will pay more than 95% of its FY13 earnings as dividends, as opposed to just the REIT.
2Q13 earnings review
2Q13 revenue rose by 9.4% yoy, driven mainly by the higher revenue of its property segment. The property segment’s revenue was up 16.6% yoy due to the renewal of the Petronas Twin Towers’ triple net lease for another 15 years beginning 1 Oct 2012. The retail division’s revenue increased 11.7% yoy due to the improved rental and occupancy rates.
REIT structure takes effect
KLCCP's 1H13 core earnings only formed 45% of our full-year forecast. However, we expect stronger earnings in 2H13, underpinned by the lower tax rates once the stapled REIT structure takes full effect in 2H13.
Publish date: 22/08/13