KLCC Stapled Group’s 9M14  net  profit  came  in  line  at  78%/76%  of our/consensus estimates. Maintain NEUTRAL and SOP-based MYR6.96 TP,  a  2.7%  upside.  9M  net  profit  grew  11.9%  YoY,  as  the  group continued  to  reap  the  benefits  of  substantial  tax  savings  and  lower minority  interests  as  a  result  of  the  REIT’s  structure.  We  expect  all segments to grow steadily going forward.  
 
In  line.  KLCC  Stapled  Group’s (KLCCSG) MYR171.2m  3Q14  core  net profit  (-3.7%  YoY,  +13.4%  QoQ)  brought  9M14  earnings  to  MYR506m (+11.9%  YoY).  This  came  in  line  at  about  78%/76%  of  our/consensus estimates  respectively.  Management  services  revenue  for  9M14  grew 20.3%  YoY,  mainly  due  to  maiden  contributions  from  managing properties  held  under  KLCC  REIT.  9M  hospitality revenue  also  saw  an 11.8%  jump  on  higher  contribution  from  the  food  &  beverage  segment after  the  completion  of  Mandarin  Oriental’s  ballroom  renovations.  Net profit  growth  continued  to  be  buoyed  by  substantial  tax  savings  and lower  minority  interest  charges  as  a  result  of  the  REIT’s  structure.  An 8.19 sen dividend per stapled share was declared for the quarter.  

Growth still intact. Management believes, and we concur, that its office segment  will  continue  to  be  largely  unaffected  by  the  incoming competition, as most of KLCCSG’s office assets are fully occupied and on triple net leases.  The growth in its retail segment  should continue to be underpinned by strong rental growth in Suria KLCC, with an average rental  reversion  of  about  5%.  Occupancy  for  the  mall  is  stable  at  98% currently. We believe Mandarin Oriental is also expected to benefit from higher  occupancy  and  average  room  rates  post-refurbishments. Meanwhile,  Phases  1  and  2  of  Kompleks  Dayabumi’s  redevelopment (KDR) are now almost completed, whereas Phase 3 of KDR is targeted to  start  in  2015  once  an  anchor  tenant  for  the  new  60-storey  office  is 
secured.  

Earnings forecasts. We make no changes to our FY14/FY15 earnings forecasts. We also introduce our FY16 numbers.

Maintain NEUTRAL. Maintain NEUTRAL and SOP-based MYR6.96 TP. We reiterate our view that KLCCSG will continue to record decent growth from  both  its  property  investment  and  development  segments. Nonetheless, we believe that the stock is now fairly valued. 

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

KLCC Stapled Group (KLCCSG) consists of KLCC Property Holdings (KLCCP) 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