KEY INVESTMENT HIGHLIGHTS

• 9MFY19 earnings in line

• Higher sequential earnings driven by retail segment

• Flattish earnings in 9MFY19

• Earnings estimates maintained

• Maintain NEUTRAL with unchanged TP of RM7.78

9MFY19 earnings in line. KLCCP Stapled Group (KLCCP) 9MFY19 core net income (CNI) of RM545.7m came in within expectations, meeting 72% and 75% of our and consensus full year estimates respectively. Distribution per unit (DPU) of 8.80sen was announced for the quarter, bringing cumulative DPU to 26.40 sen.

Higher sequential earnings driven by retail segment. On sequential basis, 3QFY19 core net income is marginally higher at RM181.4m (+0.6%qoq) mainly due to higher contribution from retail segment. Profit before tax (PBT) of retail segment grew by 2.5%qoq mainly due to lower maintenance cost. Meanwhile, narrowing losses from hotel segment also helped in higher earnings in 3QFY19. Note that hotel segment recorded pre-tax loss of RM424k compared to pre-tax loss of RM816k in the previous quarter.

Flattish earnings in 9MFY19. Cumulatively, 9MFY19 core net income is marginally higher at RM545.7m (+0.8%yoy) mainly driven by retail division. PBT of retail division inched up by 2.7%yoy due to higher rental rate and strong advertising income which cushioned the loss from retail income from reconfiguration exercise. Meanwhile, earnings of office division is stable on the back of long-term lease profile and full occupancy at all office buildings.

Maintain NEUTRAL with an unchanged TP of RM7.78. We make no changes to our earnings forecasts for FY19/20. We also maintain our TP of RM7.78 from 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 flattish earnings outlook. Dividend yield is estimated at 4.4%.

Source: MIDF Research - 12 Nov 2019