INVESTMENT HIGHLIGHTS

• FY18 earnings within expectations

• Higher sequential earnings driven by retail division

• Flattish full year earnings

• Maintain NEUTRAL with unchanged TP of RM7.76

FY18 earnings within expectations. KLCCP Stapled Group (KLCCP) FY18 core net income of RM726.7m came in within expectations, making up 99% and 100% of our and consensus full year forecasts respectively. Distribution per unit (DPU) of 10.9sen was announced for the quarter, bringing total DPU to 37sen in FY18.

Higher sequential earnings driven by retail division. On sequential basis, core net income was higher at RM185.5m (+2.2%qoq), mainly driven by higher contribution from retail division. Profit before tax (PBT) of retail division climbed 8.9%qoq due to higher rental rates of Suria KLCC. Meanwhile, PBT of office division was flattish at +0.16%qoq.

Flattish full year earnings. FY18 earnings of KLCCP was marginally higher at RM726.7m (+0.9%yoy), contributed by higher earnings from office and retail divisions. PBT of office division climbed 1.0%yoy, underpinned by full occupancy and long-term leases. Similarly, PBT of retail division inched up by 2.8%yoy due to higher occupancy rates and higher rental rates of Suria KLCC. Meanwhile, PBT of hotel division shrank by -98%yoy due to higher depreciation on the newly refurbished rooms.

Maintain NEUTRAL with an unchanged TP of RM7.76. We maintain our earnings forecast for FY19. We also introduce our earnings forecast for FY20. We maintain our TP for KLCCP at RM7.76, based on Dividend Discount Model with required rate of required return of 7.8%. We maintain our Neutral call on KLCCP due to its neutral earnings outlook. Dividend yield is estimated at 4.6%.

Source: MIDF Research - 25 Jan 2019