INVESTMENT HIGHLIGHTS

• FY16 earnings in line

• Flat full year earnings

• Earnings forecast maintained

• Maintain NEUTRAL with a revised TP of RM7.60

FY16 earnings in line. KLCCP Stapled Group (KLCCP) FY16 core net income (PATAMI) of RM719.0m was within ours and consensus expectation, at 100% and 95% of our and consensus full year estimates respectively. Distribution per unit (DPU) of 9.85sen was declared for 4QFY16, bringing total DPU to 35.7sen in FY16.

Flat full year earnings. Core net income for FY16 was flattish, declining by a marginal 0.8%yoy to RM719m. The marginal decline in full year earnings was largely due to overall flat performance of all division. Profit before tax (PBT) of retail division loses by a marginal 0.01%. Meanwhile, PBT of office division held remains flat by losing a marginal 0.17%. On the other hand, hotel division reported pre-tax loss of RM3.24m due to weak hospitality demand coupled with renovation works of the presidential suite in Mandarin Oriental. Nevertheless, hotel division returned to the black in 4QFY16 by registering PBT of RM2.95m from pre-tax loss of RM1.49m which we believe could be due to seasonally higher hospitality demand during year end.

Earnings forecast maintained. We maintain our earnings forecast for FY17. We also introduce our earnings forecast for FY18. We are expecting earnings of KLCCP to be steady going forward due to its longterm lease agreement with office tenants while retail division is supported by its prime location at Suria KLCC.

Maintain NEUTRAL with revised TP of RM7.60 (previously: RM7.30). Our target price is revised higher as we rollover our valuation to FY17, based on DDM with required rate of required return of 7.8%.

Source: MIDF Research - 23 Jan 2017