Results

• 9MFY15 gross revenue of RM993.1m (-1.3% yoy) was translated into normalised PATAMI of RM535.6m (+5.8% yoy), accounting for 77.3% and 69.5% of HLIB and consensus forecasts, respectively.

Deviations

• Slightly above expectations (3.1% above i f annualized) due to lower finance cost and higher interest income.

Dividends

• Declared a dividend of 8.15 (FY14: 8.19) sen per share (9MFY15: 24.8 sen), accounting for 71.9% and 73.0% HLIB and consensus full year DPU projections, respectively.

Highlights

• Lower revenue of -1.3% yoy due to closure of City Point Kompleks Dayabumi for redevelopment of office segment as well as lower contribution from hotel operations in the 1H.

• Stable retail revenue growth (+2.0% yoy) as well as management service (+7.7% yoy).

• A one-off written off of RM32.2m for demolition of City Point Podium, Kompleks Dayabumi, PATAMI would have increased by around 18.2% to around RM177.2m by excluding this item.

• The contribution from hotel segment has reverted back to normal level evidenced by the growth of 4.2% yoy & 30.1% qoq, post the renovation works of meeting room as well as recreational facilities in current quarter.

• 100% and 98% occupancy rate are maintained for office port folio and retail portfolio, respectively with overall NPI stable at 75%.

Positives

• update on the newly secured long term lease with existing tenant of Menara ExxonMobil upon expi ry of lease for 9 years with option for further 3 successive terms of 3 years each meanwhile; on retail segment, 63% leases up for renewal in FY2015 were renewed with 7 new tenants.

Risks

• Potential holding company discount for the stapled security.
• 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%), 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

• Lack of near-term catalyst(s).

Valuation

• Maintain HOLD recommendation on the equity and unchanged TP of RM6.90.
• Targeted yield remains at 5.2% based on 1 year historical average yield spread of KLCCSS and 7-year MGS.

Source: Hong Leong Investment Bank Research - 12 Nov 2015