Analysts keep call intact for KLCCP Stapled Group on earnings prospect; yield targets from 5.5%

• In a note, Kenanga Investment Bank Bhd said it is optimistic about KLCCP's prospects in the upcoming quarters, bolstered by the office division's robust 100% occupancy rate as of end-December 2023, increase in hotel operation’s occupancy ratio from 52% to 55%, and improved performance in the management services due to the rise in transient and season car park customers.

KUALA LUMPUR (Feb 8): Analysts tracking KLCCP Stapled Group anticipate a stable earnings trajectory for the group amid sustained robust tourist activities as well as a steady performance from the facilities management and office segments’ divisions.

In a note, Kenanga Investment Bank Bhd said it is optimistic about KLCCP's prospects in the upcoming quarters, bolstered by the office division's robust 100% occupancy rate as of end-December 2023, increase in hotel operation’s occupancy ratio from 52% to 55%, and improved performance in the management services due to the rise in transient and season car park customers.

“With businesses now surpassing pre-pandemic levels, we foresee a promising outlook for the upcoming quarters. Year-on-year, the retail footfall climbed by 30%, suggesting that consumer spending remains strong.

“Concurrently, the group (comprising KLCC Property Holdings Bhd and KLCC Real Estate Investment Trust) has expressed interest in exploring global assets to add to its portfolio but prioritizing the enhancement of local operations, while also considering venturing into the healthcare sector.

“We maintain our FY2024F [ending Dec 31] earnings forecasts, raise our TP [target price] by 3% to RM8 (from RM7.73) and maintain our ‘outperform’ call,” said Kenanga.

Kenanga said the TP is against an unchanged target yield of 5.5% (derived from a 1.5% yield spread above its 10-year Malaysian Government Securities (MGS) assumption of 4%) and on a 95% payout, in line with historical averages.

Separately, Hong Leong Investment Bank (HLIB) Bhd said KLCCP’s hotel and retail will continue to exhibit strong performance with the expectation of further improvement in tourist arrivals this year.

“Moreover, should Suria KLCC’s acquisition be completed within the expected timeframe, the retail segment should see higher performance from 3Q2024 onwards from having full contribution from the mall’s earnings,” said HLIB which kept its ‘hold’ call with an unchanged TP of RM6.89.

HLIB said the TP is based on FY24 dividend per unit on a targeted yield of 5.7%, derived from 5-year historical average yield spread between KLCC REIT and 10-year MGS.

KLCCP Stapled Group’s net profit rose 37.6% to RM384.59 million for the fourth quarter ended Dec 31, 2023 from RM279.47 million a year ago, primarily contributed by improvement in the hotel and retail segments, while revenue went up 7.1% to RM442.63 million from RM413.26 million.

For FY2023 ended Dec 31, KLCCP's net profit grew 18.9% to RM931.29 million from RM782.66 million for the previous year, as revenue rose 10.9% to RM1.62 billion from RM1.46 billion.

At the time of writing on Thursday, KLCCP’s share price was eight sen or 1.09% higher at RM7.39, giving it a market capitalisation of RM13.34 billion.

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