Results

• FY14 gross revenue of RM1.4bn (+5.7% yoy) was translated into normalised PATAMI of RM689.3m (+10.3% yoy), accounting for 103.4% and 101.9% of HLIB and consensus FY forecasts, respectively.

Deviations

• None.

Dividends

• As anticipated, fourth interim dividend of 8.75 sen (4Q13: 8.71 sen) was declared during fourth quarter of which 3.89 sen comes from KLCC Property Holdings and 4.86 sen from KLCC REIT.

• YTD dividend amounted to 33.6 sen per unit (FY13: 28.9 sen) accounting for 101.2% of our full year DPU assumptions.

Highlights

• Full year gross revenue inched up by 5.7% yoy mainly contributed by higher management services and retail revenue. Despite higher increase in property operating expenses (+7.3% yoy), normalised PATAMI increased +10.3% yoy due to lower effective tax rate.

• Revenue from management services jumped 21.2% yoy due to higher parking rates and also provision of additional services for facilities management.

• Renovation on the hotel has been completed and results in higher revenue (+9.0% yoy) mainly from food and beverages and ballroom facilities.

Positives

• contribution from retail segment (+5.4% yoy) largelycoming from higher rental rates for new and renewed outlets.

• Marginal growth from office segment (0.1% yoy) mainly attributable to implementation of triple net lease for Kompleks Dayabumi.

Risks

• Potential holding company discount for the stapled security.
• High portfolio concentration on office segment.
• Competition from upcoming new iconic office building within Kuala Lumpur Central Business District.

Forecasts

• Unchanged.

Rating

HOLD , TP: RM6.90

Positives

• (1) High occupancy rates (>90%), consistentlystrong 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

• Lack of near-term catalyst.

Valuation

• Maintain HOLD with a higher TP of RM6.90 (previously RM6.49) as we roll forward our valuation to FY15.
• Targeted yield at 5.2% based on historical average yield spread of KLCCSS and 7-year MGS.

Source: Hong Leong Investment Bank Research - 27 Jan 2015