Results

1Q13 core PATAMI declined 13.3% yoy to RM88.0m, making up 21% and 18% of HLIB and consensus estimates respectively.

Deviations

The slight deviation was due to tax timing differences in 1Q.

Dividends

4.5 sen single-tier first interim dividend declared in 1Q. We now raise our FY13 dividend forecast from 10.5 sen (based on the old share base of 934m shares) to 27.0 sen (based on the new share based of 1.8bn shares), on account of: (1) The Stapled Securities (SS) and REIT establishment date being on 9 Apr 2013; (2) 95% payout for the REIT.

Highlights

Revenue from the office segment increased 21% yoy to RM148.1m in 1Q13, primarily due to the renewal of the triple net lease for the PETRONAS Twin Towers (PETT) for another 15 years effective 1 Oct 2012.

Revenue from the retail segment increased 27% yoy to RM116.4m in 1Q13, driven by higher rates from renewals, improved occupancy and higher percentage rents.

Revenue from the hotel segment declined 13% yoy to RM35.8m in 1Q13, mainly due to the overall softer market and renovation of the ballrooms.

Risks

• Potential holding company discount for the stapled security.

Forecasts

• We raise FY13-14E forecast by 53-55%, mainly to account for the removal of the 49% MI from PETT, which took effect on the establishment date of the SS and the REIT (9 Apr 2013).

Rating

HOLD

• Positives: (1) High occupancy rates (>90%), consistently strong human traffic and desirable tenant profile due to prestigious and desirable KLCC address; and (2) Stability of rental yield and scope for capital appreciation;
• Negatives: Limited development pipeline.

Valuation

• We now value KLCCP as a REIT, and estimate that based on a projected blended 80% payout for the stapled securities, a 4.5% DY would give us a TP of RM7.06 vs. previous TP of RM6.60 based on 5.5% DY. Due to strong recent performance in share price, we downgrade to HOLD.

Source: Hong Leong Investment Bank Research - 27 May 2013