INVESTMENT HIGHLIGHTS

• 1HFY19 earnings within expectation

• CNI for the first half increased by 1.3%yoy to RM364.3m

• 2QFY19 CNI increased marginally to RM180.4m

• Maintain NEUTRAL with an unchanged TP of RM7.78

1HFY19 earnings within expectation. KLCCP Stapled Group (KLCCP) 1HFY19 core net income (CNI) of RM364.3m was in line with our full year estimates at 48%. It is also within street’s forecast at 49%. Distribution per unit (DPU) of 8.8sen was announced for the quarter, bringing YTD DPU to 17.6sen, which was also within expectation.

CNI for the first half increased by 1.3%yoy to RM364.3m while revenue improved by 2.1%yoy to RM704.5m. The improvement was largely attributed to the higher sales at the retail and hotel segments at 4.45%yoy to RM257.7m and 3.91%yoy to RM84.25m respectively. The pre-tax loss at the hotel segment had narrowed to -RM1.2m from - RM1.7m previously. Meanwhile, PBT for the retail segment was up by 1.9%yoy to RM193.6m and the office segment PBT climbed 1.2%yoy to RM242.3m.

2QFY19 CNI increased marginally to RM180.4m as revenue was up by 1.8%yoy. During the quarter, retail segment revenue added 3.8%yoy to RM127.7m because of higher rental rates and revenue from internal advertising income. However, PBT for the retail segment eased 0.8% to RM94.9m due to maintenance works and upgrades in Suria KLCC. For the office segment, PBT improved by 1.5% to RM120.9m due to higher recovery of utility charges and lower operating expenses. Hotel operations pre-tax loss for the quarter narrowed to -RM0.8m from -RM4.1m last year due to improved occupancy rate of 58% (vs 47% last year) as well as higher revenue from the food and beverage segment.

Maintain NEUTRAL with an unchanged TP of RM7.78. We maintain our FY19F/FY20F earnings forecast in view of results that came in line. Our TP of RM7.78 is based on Dividend Discount Model with required rate of required return of 7.8%. We maintain our Neutral call on KLCCP due to lack of imminent catalysts. Dividend yield is estimated at 4.1%.

Source: MIDF Research - 21 Aug 2019