KLCCP expected to end 2018 higher via office and retail segments

According to analysts, conservative growth is projected in the group’s core divisions


KLCCP Stapled Group’s financial performance in the second quarter of 2018 (2Q18) grew marginally as a result of the high occupancy rate in its office division, along with higher rental rates.

KLCCP, comprising KLCC Property Holdings Bhd and KLCC Real Estate Investment Trust (REIT), said the growth is due to the 100% occupancy in Menara ExxonMobil since April 2017.

Analysts anticipate improved earnings for financial year 2018 (FY18) as they are expecting conservative growth in KLCCP’s core divisions.

MIDF Amanah Investment Bank Bhd noted that KLCCP’s FY18 earnings are expected to be cushioned by the retail and office segments.

“We expect earnings of its office division to remain stable as the next rental reversion of the Petronas Twin Towers, which is on a fixed step-up basis, will take place in October 2018.

“Earnings of the retail division will also be supported by the marginally higher rental rates of Suria KLCC,” it said in a research report.

It added that KLCCP’s first half of 2018 (1H18) earnings inched up 1.4% as a result of higher contribution from the office and retail divisions. “On a yearly basis, 1H18 earnings inched up 1.4% as the profit before tax (PBT) for the office division climbed by 0.7% — driven mainly by the full occupancy rate of Menara ExxonMobil.

“Similarly, PBT of the retail division increased by 1.5% due to higher rental rates,” it said.

KLCCP’s operating revenue in office segment remained flat in 2Q18 with RM149.1 million, while its retail segment increased marginally by 0.83% to RM122.9 million from RM121.9 million recorded a year ago.

Meanwhile, Hong Leong Investment Bank Bhd (HLIBB) expects KLCCP to have a stable performance ahead, as a better contribution is anticipated from the hotel segment.

“Going forward, as the second phase room refurbishment at Mandarin Oriental is expected to be completed by 3Q18, we expect a better contribution from the hotel segment.

“We retain our forecast and maintain a ‘Hold’ call with an unchanged target price of RM7.88 based on a targeted yield of 5%,” it said.

KLCCP’s operating revenue for the hotel segment was marginally up 1.75% to RM37.1 million in 2Q18 from RM36.5 million.

However, HLIBB added that the performance was lower than in the first three months of 2018 due to lower occupancy during the festive month and postponement of banqueting events due to the general election.

Meanwhile, Kenanga Investment Bank Bhd maintained its earnings forecast for KLCCP as a modest growth was recorded for the group’s rental rates and improved occupancy rates.

“We maintain the FY18 and FY19 net profit projection between RM719 million and RM732 million, with growth driven by modest rental step-ups and improvement of occupancy to 60% from 50% for Mandarin Oriental,” it said.

KLCCP’s net profit rose in 2Q18 by 0.7% to RM179.15 million from RM177.96 million a year ago, while its quarterly turnover rose 2.2% to RM345 million from RM337.52 million — contributed mainly from the additional contracts in the management services segment and stronger revenue from the hotel segment.

It noted higher earnings per share of 9.92 sen for 2Q18 compared to 9.86 sen a year ago.

Both KLCC Property and KLCC REIT declared a second interim dividend and income distribution of 2.98 sen and 5.72 sen respectively, totalling 8.7 sen, to be paid on Sept 28, 2018.

MIDF said KLCCP’s accumulative performance for the year was within its expectations, making up 49% of its and consensus full-year forecasts.

Last Friday, KLCC Property’s shares closed 1.59% higher at RM7.69 with a market capitalisation of RM14.05 billion.


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