KEY INVESTMENT HIGHLIGHTS

• 9MFY24 earnings within expectations
• Solid earnings driven by retail division
• Earnings forecast maintained
• Maintain NEUTRAL with an unchanged TP of RM7.80

9MFY24 earnings within expectations. KLCCP Stapled Group (KLCCP) 9MFY24 core net income of RM585.6m came in within expectations, making up 72% and 73% of our and consensus full year estimates respectively. Meanwhile, a third interim distribution per unit (DPU) of 9.2sen was announced for 3QFY24, bringing total DPU to 27.4sen in 9MFY24.

Solid earnings driven by retail division. Sequentially, 3QFY24 core net income increased to RM206.5m (+8.1%qoq) due to higher contribution from retail segment and hotel division. The income growth of retail division was mainly driven by higher shopper footfall while hotel division returned to the black in 3QFY24 on the back of higher occupancy rate of Mandarin Oriental KL. On yearly basis, 3QFY24 core net income was higher (+11.4%yoy), bringing 9MFY24 core net income higher at RM585.6m (+7.1%yoy). The higher earnings in 9MFY24 were mainly contributed by increased contribution from retail division as KLCCP completed acquisition of remaining 40% in Suria KLCC in April 2024. Besides, the earnings growth of the retail division is also driven by positive rental reversion as shopper footfall was encouraging. Meanwhile, hotel division returned to the black in 9MFY24, driven by higher occupancy rate of Mandarin Oriental KL. On the other hand, contribution from office division was steady on the back of long lease agreement of its office buildings. Nevertheless, earnings growth in 9MFY24 was partly offset by higher financing cost (+45%yoy) due to acquisition of remaining stakes in Suria KLCC.

Earnings forecast maintained. We make no changes to earnings forecast for FY24F/25F/26F. Earnings outlook for KLCCP is expected to remain stable due to positive rental reversion of Suria KLCC and higher contribution from Mandarin Oriental KL. We expect Suria KLCC and Mandarin Oriental KL to continue to benefit from higher tourist arrivals in FY25. Meanwhile, the contribution from the office division should remain constant due to its long lease agreement.

Maintain NEUTRAL with an unchanged TP of RM7.80. Our TP is unchanged at RM7.80, based on Dividend Discount Model. Despite the stable earnings outlook for KLCCP, upside is limited at this juncture. Hence, we maintain our NEUTRAL call on KLCCP. Meanwhile, dividend yield is estimated at 4.8%.

Source: MIDF Research - 26 Nov 2024