KLCC (5235SS) - KLCC Property Holdings - Notes from Invest Malaysia 2015
Target RM6.90 (Stock Rating: HOLD)
The main takeaway on KLCCP from Invest Malaysia 2015 (IM15) is that near-term earnings growth is likely to remain stable despite the weak consumer sentiment. Its triple net lease agreements for its office assets should provide it with stable earnings. It also shields KLCCP office assets from rising utilities costs as that is passed on to the lessee. We maintain our Hold call on the stock with an unchanged target DDM-based target price of RM6.90. For exposure to M-REITs, we prefer Axis REIT instead.
What Happened
KLCCP's presentation during IM15 was attended by more than 80 fund managers and buy-side analysts. CEO Datuk Hashim Wahir gave a detailed presentation on the group's assets and operations, together with its future outlook. We gather that KLCCP's asset growth is likely to be underpinned by the various projects around the KLCC Precinct. This includes the various developments which KLCCP's parent is currently developing around the KLCC area. Questions from the floor were mainly focused on its retail segments considering the current weak consumer sentiment. Its retail segment accounts for around 34% of overall group revenues.
What We Think
We believe that FY15 earnings should remain resilient despite the weaker consumer sentiment as KLCCP's Suria mall remains one of the top tourism destinations in the Klang Valley. Furthermore, based on what we gather from the presentation, management remains confident about generating further positive rental reversions from its tenants. We are also comforted by KLCCP's long-term triple net lease agreements with its tenants for its office assets which should shield it from any oversupply of office areas. Thus, FY15 earnings are expected to remain stable despite the current challenging operating environment. We note, however, that boosting DPS through new acquisitions is not likely as we gather that the planned acquisitions from its parent are still a few years away from being completed. In terms of third-party acquisitions, we understand that management is always on the lookout, although we believe it is very selective and will only consider an acquisition that has the scale and quality to match its existing portfolio.
What You Should Do
We think its dividend yields backed by its stable earnings should continue to attract investor interest, although we note that at current valuations, its yields have become slightly unattractive.
Source: CIMB Daybreak - 24 April 2015
Target RM6.90 (Stock Rating: HOLD)
The main takeaway on KLCCP from Invest Malaysia 2015 (IM15) is that near-term earnings growth is likely to remain stable despite the weak consumer sentiment. Its triple net lease agreements for its office assets should provide it with stable earnings. It also shields KLCCP office assets from rising utilities costs as that is passed on to the lessee. We maintain our Hold call on the stock with an unchanged target DDM-based target price of RM6.90. For exposure to M-REITs, we prefer Axis REIT instead.
What Happened
KLCCP's presentation during IM15 was attended by more than 80 fund managers and buy-side analysts. CEO Datuk Hashim Wahir gave a detailed presentation on the group's assets and operations, together with its future outlook. We gather that KLCCP's asset growth is likely to be underpinned by the various projects around the KLCC Precinct. This includes the various developments which KLCCP's parent is currently developing around the KLCC area. Questions from the floor were mainly focused on its retail segments considering the current weak consumer sentiment. Its retail segment accounts for around 34% of overall group revenues.
What We Think
We believe that FY15 earnings should remain resilient despite the weaker consumer sentiment as KLCCP's Suria mall remains one of the top tourism destinations in the Klang Valley. Furthermore, based on what we gather from the presentation, management remains confident about generating further positive rental reversions from its tenants. We are also comforted by KLCCP's long-term triple net lease agreements with its tenants for its office assets which should shield it from any oversupply of office areas. Thus, FY15 earnings are expected to remain stable despite the current challenging operating environment. We note, however, that boosting DPS through new acquisitions is not likely as we gather that the planned acquisitions from its parent are still a few years away from being completed. In terms of third-party acquisitions, we understand that management is always on the lookout, although we believe it is very selective and will only consider an acquisition that has the scale and quality to match its existing portfolio.
What You Should Do
We think its dividend yields backed by its stable earnings should continue to attract investor interest, although we note that at current valuations, its yields have become slightly unattractive.
Source: CIMB Daybreak - 24 April 2015
