KLCC Stapled leverages on upcoming integrated project for growth

It is also eyeing potential asset injections, following the recent shareholders’ nod for 10% issuance of shares for new acquisitions


KLCC Stapled Group is expected to be in an advantageous position upon the completion of an upcoming integrated development project — a complex that would be connected to the Mass Rapid Transit Line 2 (MRT2) project — to be undertaken by parent company KLCC Property Holdings Bhd

CEO Datuk Hashim Wahir said KLCC Stapled, along with a joint-venture partner and KLCC Property Holdings, have secured a mixed-development project which comprises retail, office and hotel components surrounding the Suria KLCC area.

“Fortunately, with the government’s MRT2, we will have the benefit of an MRT station on Jalan Binjai that augurs well with our integrated development plan to extend our project to the east side.

“So we will have a station there, which has taken an integrated additional space as a shopping mall and expansion of Suria KLCC all the way to the other side,” he told reporters at KLCC Stapled’s AGM in Kuala Lumpur yesterday.

However, Hashim said there is no estimation on the value of the project yet, as it is still in the preliminary stage of planning and too early to gauge its gross development value.

He said the profile and the deal itself are expected to become a significant contributor and addition to the group.

The upcoming integrated development is expected to be completed by 2022, in tandem with the completion of MRT2.

In the meantime, KLCC Stapled has allocated approximately RM20 million in capital expenditure for the ever evolving Suria KLCC to accommodate the boo- ming footfall, which also contributed to the RM2.6 billion annual sales turnover to date.

Hashim said the group is also eyeing potential asset injections, following the recent shareholders’ approval for 10% issuance of shares for new acquisitions.

“However, we have not found assets that are value accretive that can give us the accretion in distribution for us to acquire. If we find one, of course we will embark on it,” he added.

Hashim said the group also plans to focus on the company’s strength and its established market to continue attract enough footfall that would translate to further growth. He added that KLCC Stapled is expected to disburse approximately 5% year-on-year (YoY) distribution yield for 2018.

Based on the group’s share price, Hashim said the distribution yield is over 4%, which is supported by yields on property appreciation as well.

“So far, in the last five years, we have appreciation of distribution of about 25% — translating to YoY appreciation of 5%. We will continue to focus on that because office spaces’ reversion rate increases by 10% every three years, while the retail segment is hovering at between 4% and 5%,” he said.

As such, Hashim said the group is expected to distribute approximately 97% of the total distributable income in 2018, higher than the 90% distributed previously.

“I think so far we have been able to maintain our cost, which has allowed more distribution to shareholders,” he added.

Amid the current challenging market condition, Hashim said assets under the group provides guarantee for investors, despite the increasing Overnight Policy Rate that could make other investments more attractive in terms of yield.

“But I believe that institutional investors want to have a portfolio of a stable yield versus yielding on a short term,” he added.

Assets under the group’s portfolio include the Petronas Twin Towers, Menara ExxonMobil, Menara 3 Petronas, Suria KLCC and the Mandarin Oriental.