KLCC Property Holdings -
Share price: MYR6.45
Target price: MYR6.70 (unchanged)
Maintain HOLD. 9M13 core pretax profit of MYR651m was within our expectations but above consensus estimates. While long-term earnings growth prospects are intact, KLCCP lacks rerating catalysts as full control on the Suria KLCC mall (Suria) is unlikely to materialize anytime soon. KLCCP’s immediate focus is on the redevelopment/development of the Kompleks Dayabumi (KD) and Lot D1. We maintain our FY13-15 earnings forecasts and MYR6.70 TP (on 0.8 beta assumption).
Results in line. KLCCP’s 3Q13 core pretax profit was MYR224m (+1.4% QoQ, +18% YoY), lifting 9M earnings to MYR651m (+17% YoY), making up 76% of our and 79% of consensus full-year estimates. KLCCP has declared a net DPU/DPS of 7.8 sen for 3Q (9M13: 19.4sen, +62% YoY), which is in line with our full-year forecast.
Improvement in most divisions. Most divisions reported QoQ pre-tax profit growth in 3Q13, negating weaker performance from Mandarin Oriental (hotel; -9.6% QoQ). Suria continued to deliver steady earnings growth (+17% YoY, +3% QoQ) driven by positive rental reversion, better occupancy and higher turnover rents whilst offices (long leases by PETRONAS) provide a strong base for earnings.
Redeveloping KD. Phase 2 of the upgrading works in KD is on schedule and will be completed soon. KLCCP has secured a hotel operator while it is in talks with a few potential anchor tenants for the City Point building (CPB), part of the KD. To recap, KLCCP will redevelop CPB into a 60-storey building comprising 500 hotel rooms and 1m sq.ft. of office spaces. Construction works should be able to commence by 2Q14 once the anchor tenant is identified.
Leasing Lot D1 to PETRONAS? KLCCP is in the process of securing anchor tenants for its Lot D1 mixed development (80:20 office: retail,). There is a likelihood that PETRONAS may come in as the master lessee for the building as its aggressive expansion plan/capex should attract leasing from its associates/JV partners/service providers/ contractors to the KLCC area, we think.
Publish date: 30/10/13