Results

3Q13 core PAT rose 80% yoy to RM177.8m, with YTD net profit of RM452.4m making up 79% and 78% of HLIB and consensus estimates respectively.

Deviations

None.

Dividends

8.28 sen DPS was declared in 3Q13, bringing YTD DPS to 20.23 sen, or 71% of our 28.64 sen DPS forecast.

Highlights

Revenue from the office segment increased 18% yoy to RM148m in 3Q13, 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 15% yoy to RM108m in 3Q13, driven by higher rates from renewals, improved occupancy and higher percentage rents.

Revenue from the hotel segment declined 3.7% qoq to RM41m in 3Q13, mainly due to the overall softer market and renovation of the ballrooms.

Risks

Potential holding company discount for the stapled security.

Forecasts

Maintained.

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: Lower than expected dividend payout; performance drag from the hotel segment.

Valuation

Our target yield remains unchanged at 5.5% and we maintain our RM6.28 TP and HOLD recommendation on the stock.

Source: Hong Leong Investment Bank Research - 30 Oct 2013