Period 2Q12 / 1H12
Actual vs. Expectations
1H12 core net profit
of RM185m is considered slightly above expectations. Typically, 1H makesup
<52% of full year. The current 1H12 accounted for 54% of street’s FY12E core
earnings of RM341m and 55% of our RM336m.
Mandarin Oriental (MO) occupancy improved and we believe Menara 3
Petronas (M3P) Office saw better than expected rental rates.
Dividends 2Q12
single-tier dividend of 4.0sen (payable 12-Sept) implies 1H12 total of
8.0sen.
Key Results Highlights
YoY, 1H12 core
earnings grew 35% on the back of maiden M3P Office and full M3P Retail contributions.
MO’s PBT improved 45% to RM15m on improved occupancy rates (estimating 65%-67%)
and non-room incomes.
QoQ, 2Q12 PBT
(ex-fair value adjustments) was flat at RM184m albeit turnover rising 5% QoQ; positive
top-line effect was negated by higher operational cost (likely arising for M3P
Office start-ups) and higher finance cost (+3% QoQ).
Outlook Upcoming earnings catalyst is Menara Maxis (associate
holdings) long-term lease renewals which is coming up in May-2013; we have yet
to factor for renewed long-term lease rates.
Change to Forecasts
Raising FY12E core
earnings by 4% to RM350m to reflect better M3P Office rates and higher MO occupancy
rates (66% vs. previous 62%). Estimate FY12E NDPS of 16.0sen (3.1% yield) assuming
similar to historical payout of 43%.
Rating Maintain OUTPERFORM
KLCCP had undergone
de-rating over the last few years but it is now poised to re-rate up to its previous
glory and fully realize its value if full RCULS conversion and REIT-ing takes
place concurrently.
Valuation Raising Target Price to RM6.00 (RM4.60* previously)
to reflect full FD SoP RNAV. Based on the recent strong share price performance,
we strongly believe that the group may REIT most (if
not entire) portfolio.
Risks Risk
to our call lies with; 1) our scenario or variations of it not panning out this
year; 2) oversupply of office space in KLCC area which will pressure valuations
downwards; 3) decline in MO occupancy rates.
Source: Kenanga
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