Journey to Wealth
KLCC Property Holding - 1H12 slightly above expectation
Period 2Q12 / 1H12
Actual vs. Expectations
1H12 core net profit of RM185m is considered slightly above expectations. Typically, 1H makesup <52% of full year. The current 1H12 accounted for 54% of street's FY12E core earnings of RM341m and 55% of our RM336m. Mandarin Oriental (MO) occupancy improved and we believe Menara 3 Petronas (M3P) Office saw better than expected rental rates.
Dividends 2Q12 single-tier dividend of 4.0sen (payable 12-Sept) implies 1H12 total of 8.0sen.
Key Results Highlights
YoY, 1H12 core earnings grew 35% on the back of maiden M3P Office and full M3P Retail contributions. MO's PBT improved 45% to RM15m on improved occupancy rates (estimating 65%-67%) and non-room incomes.
QoQ, 2Q12 PBT (ex-fair value adjustments) was flat at RM184m albeit turnover rising 5% QoQ; positive top-line effect was negated by higher operational cost (likely arising for M3P Office start-ups) and higher finance cost (+3% QoQ).
Outlook Upcoming earnings catalyst is Menara Maxis (associate holdings) long-term lease renewals which is coming up in May-2013; we have yet to factor for renewed long-term lease rates.
Change to Forecasts
Raising FY12E core earnings by 4% to RM350m to reflect better M3P Office rates and higher MO occupancy rates (66% vs. previous 62%). Estimate FY12E NDPS of 16.0sen (3.1% yield) assuming similar to historical payout of 43%.
Rating Maintain OUTPERFORM
KLCCP had undergone de-rating over the last few years but it is now poised to re-rate up to its previous glory and fully realize its value if full RCULS conversion and REIT-ing takes place concurrently.
Valuation Raising Target Price to RM6.00 (RM4.60* previously) to reflect full FD SoP RNAV. Based on the recent strong share price performance, we strongly believe that the group may REIT most (if
not entire) portfolio.
Risks Risk to our call lies with; 1) our scenario or variations of it not panning out this year; 2) oversupply of office space in KLCC area which will pressure valuations downwards; 3) decline in MO occupancy rates.
Source: Kenanga
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