KLCCSS’ 4Q21 core PATAMI of RM215.0m (+58.8% QoQ, +18.1% YoY) brought FY21’s sum to RM640.6m (-2.4% YoY); the results were within ours but above consensus’ expectations. Declared 4th interim dividend of dividend of 12.60 sen per share. Overall, FY21 revenue fall (-5.5% YoY) was due to hotel (-12.0%; lower occupancy) and retail (-12.0%; higher rental assistance provided) segments. We maintain our forecasts, reiterate HOLD with unchanged TP of RM6.78, based on targeted yield 5.1% on FY22 DPU.

Within expectations. 4Q21 core PATAMI of RM215.0m (+58.8% QoQ, +18.1% YoY) brought FY21’s sum to RM640.6m (-2.4% YoY). The latter was achieved after adjusting for fair value gain and impairment totalling a net RM144.7m. The results were within our expectations at 105% but above consensus accounting for 108%.

Dividend. Declared 4th interim dividend of 12.60 sen per share (KLCC REIT: 6.83 sen, KLCC Property: 5.77 sen) going ex on 15 Feb 2022. This brought FY21 DPS to 33.6 sen (FY20: 30.0 sen).

QoQ. Top line improved (+33.7%) to RM348.2m. This was primarily due to stronger (i) hotel (+289.8%; on improved occupancy and F&B contribution), and (ii) retail (+76.1%; on higher footfall) segments mainly thanks to festive season and school holidays. Management services segment improved (+38.6%) due to additional services and increased parking income. Office segment remained stable (+0.3%). After excluding one off impairment and fair value gains totalling to RM144.7m, core PATAMI rose to RM215.0m (+58.8%).

YoY. Revenue jump (+14.3%) was driven by improvement in all segments; (i) hotel (+138.2%; on better occupancy and better performance in F&B), (ii) retail (+21.7%: on lower rental assistance provided and higher advertising income), (iii) management services (+12.6%; on higher car park income) and (iv) office (+1.8%: thanks to upward rental revision). Operating expenses fell -35.8%. Also, finance costs declined (-4.4%) on lower interest rates. In turn, core PATAMI improved +18.1%.

FY21. Revenue reduced (-5.5%) mainly due to (i) hotel (-12.0%; on the back of restrictions with cancellation of rooms and suspensions of events), and (ii) retail (- 12.0%; due to various assistance packages provided and lower advertising income) segments. The lower operating expenses (-18.7%) and finance cost (-5.0%) slightly cushioned the decline in core PATAMI (-2.4%).

Occupancy and gearing. Retail occupancy fell to 93% (from FY20: 97%) while hotel occupancy fell to 16% (from FY20: 19%). Office occupancy remained at 100%. Gearing level remained at 18.3% (FY20: 18.0%).

Outlook. Looking into FY22, we foresee KLCCSS’ office segment will continue its resiliency on the back of its long-term office tenancy agreements. We expect retail and hotel segments to continue its recovery, coherent with the country’s reopening of economy and ongoing booster shot rollout. 4Q showing of improved footfall and occupancy provides a promising picture of recovery.

Forecast. Maintain as the Results Were in Line.

Maintain HOLD, TP: RM6.78. We maintain HOLD with unchanged TP of RM6.78. Our TP is based on FY22 DPU on targeted yield of 5.1%, derived from 2 years historical average yield spread of KLCCSS and 10 year MGS.

Source: Hong Leong Investment Bank Research - 31 Jan 2022