The review period saw the completion of Naza Tower (NLA: 506,000 sq ft), Crest Jalan Sultan Ismail (NLA: 190,000 sq ft) and Menara Centara (NLA: 166,000 sq ft), bringing the cumulative supply of office space in Kuala Lumpur City to about 49.82 million sq ft. There were no completions in KL Fringe, so its cumulative supply remained at 21.72 million sq ft.

Its upmarket appeal is earning it a reputation as one of the most sought-after addresses in the Klang Valley.

Just five years ago, the section on the right bank of the Kinta River, which bisects Old Town and New Town, was home to largely  dilapidated or condemned buildings and vacant business premises – the result of the collapse of the tin-mining industry in the Kinta Valley in the mid-1980s

What kind of price growth and indicative asking rental yields do non-landed residences in Subang and Ara Damansara fetch? From analysis of transactions by theedgeproperty.com, low-cost apartments and flats charted the highest growth in capital values on a percentage basis.

The most expensive address is Oasis Serviced Suites, with an average price of RM744 psf.

Relative to other Malaysian REITs, KLCC REIT has been trading at a substantial premium with yields at about 1% above the 10-year Malaysian Government Securities.

Based on theedgeproperty.com’s analysis of transactions in the 12 months to 3Q2014, the combined average transacted price per square foot (psf) was RM384, with an average transacted unit price of RM330,000.

Note that S P Setia has changed its financial year-end from October to December, and we have applied the same earnings forecasts for the 14 months ending Dec 31, 2015 period as we did for the 12 months ending Oct 31, 2015 period, in view of weak property market conditions and the group’s lowered sales target for this year.

KSL remains an “outperform” albeit the lowered TP as its dividend yield for FY16E remains attractive at 7.7% vs its peers’ average of 5.9%. At our current TP, it implies a 77% discount to its RNAV of RM7.07.

Based on theedgeproperty.com’s analysis of transactions, the combined prices of Subang/Ara Damansara properties remained fairly stable in 2012 and 2013, averaging just under RM300 psf, before shooting up to RM384 psf in 3Q2014.