KLCCSG’s 3QFY13 net profit of MYR177.8m  was above estimates.    Net profit continued to be boosted by savings from tax and  lower  minority charges,  which  declined  by  double  digits  y-o-y  in  9MFY13.  The company declared a third dividend of 8.28 sen/share, slightly above our annualised estimate.  Maintain NEUTRAL,  with a revised FV  of MYR7.00, on tweaking slightly higher our FY13-14 earnings forecasts.

• Above expectations.  The 3QFY13 net profit of MYR177.8m (+77.8% yo-y; -4.7% q-o-q) was above expectations,  at more than 80% of our fullyear  forecast.  Earnings  continued  to  be  boosted  by  the  company’s stapling exercise  as it  benefited  from lower taxes and minority charges. KLCCSG  declared  a  third  dividend  of  8.28  sen/share  for  the  quarter, bringing  its  total DPS  YTD  to  20.23  sen, slightly above our annualised estimates.
• Stapling  gives  rise  to  substantial  cost  savings.  1H  revenue  rose 11.9%  y-o-y  due  to  better  contributions  from  the  property  investment division.  Management expects growth  in this  segment to  be  in line with guidance, although  the  outlook for its hotel segment  will  be  challenging going  forward.  The  company’s  9M  tax  expenses  and  minority  charges shrank  35.4%  and  74.8%  y-o-y  respectively  given  that  the  income earned by KLCC REIT is not taxable and as there are no longer minority shareholders  in  the  Petronas  Twin  Towers  since  KLCCSG  now  has 100% ownership of the asset.
• Forecasts. We raise  our FY13-14 earnings by 2-9% after revising  lower our estimates for tax and minority interest expenses.
• Maintain  NEUTRAL.  We  maintain  NEUTRAL,  but  with  a  higher  SOPbased  Fair  Value  of  MYR7.00  (from  MYR6.90)  after  adjusting  our dividend  forecast.  Although  the  stock’s  present  net  dividend  yield  of about  3.3%  is  still  below  the  10-year  MGS  bond  yields  of  about  3.6-3.7%, the redevelopment of Kompleks Dayabumi and development of its Lot D1 land could give rise to some earnings upside in the medium term. Furthermore,  KLCCSG’s  status  as  one  of  the  few  large-cap  Shariahcompliant stocks in the MREIT space  will likely sustain  investor  interest in the stock.

Financial Exhibits

SWOT Analysis

Company Profile
KLCC Stapled Group consists of KLCC Property Holdings and KLCC REIT. KLCCP’s primary  focus  is on property development and 
investment while KLCC REIT is an Islamic REIT that owns the iconic Petronas Twin Towers, among others.

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Source: RHB