KEY INVESTMENT HIGHLIGHTS

• 1HFY24 earnings within expectations
• Earnings remain stable in 1HFY24
• Earnings forecast maintained
• Maintain NEUTRAL with an unchanged target price of RM7.50

1HFY24 earnings within expectations. KLCCP Stapled Group (KLCCP) 1HFY24 core net income of RM379.1m came in within expectations, making up 46% and 37% of our and consensus full year estimates respectively. Meanwhile, second interim distribution per unit (DPU) of 9.2sen was announced for 2QFY24, bringing total DPU to 18.2sen in 1HFY24.

Earnings remain stable in 1HFY24. Sequentially, 2QFY24 core net income was marginally higher (+1.6%qoq) mainly due to higher contribution from Suria KLCC as KLCCP completed acquisition of remaining 40% in Suria KLCC in April 2024. On yearly basis, 2QFY24 core net income was higher (+5.7%yoy), in line with topline growth. That led total core net income in 1HFY24 higher at RM379.1m (+4.9%yoy). The stable earnings growth in 1HFY24 was mainly led by retail division which saw higher PBT (+10.2%yoy) which was supported by positive rental reversion and higher shopper footfall of Suria KLCC. Meanwhile, hotel division returned to the black in 1HFY24 due to improved occupancy rate of Mandarin Oriental as a result of higher tourist arrival. In addition, PBT of office division was stable due to long lease agreement. Nevertheless, earnings growth was partly offset by higher financing cost (+33%yoy) due to acquisition of remaining stakes in Suria KLCC.

Earnings forecast unchanged. We maintain our earnings forecast for FY24F/25F/26F. We see a better earnings outlook for KLCCP in FY24 and FY25 due to higher contributions from Suria KLCC after acquisition of remaining stake in Suria KLCC. Besides, earnings growth of Suria KLCC will also be driven by positive rental reversion due to high shopper footfall. Meanwhile, the performance of the hotel division is expected to recover further due to expectation of higher tourist arrivals.

Maintain NEUTRAL with an unchanged TP of RM7.50. Our TP is unchanged at RM7.50, based on Dividend Discount Model. While we see that outlook for its retail and hotel divisions is better which should support earnings growth, upside is limited at this juncture. Hence, we maintain our NEUTRAL call on KLCCP. Meanwhile, dividend yield is estimated at 4.9%.

Source: MIDF Research - 29 Aug 2024