KLCC Stapled Group’s 1H17 below expectations
KUALA LUMPUR: The overall performance of KLCC Stapled Group, which comprises of the KLCC Property Holdings Bhd and the KLCC Real Estate Investment Trust, has come below expectations in the first half of 2017 (1H17) as the group’s realised distributable income (RDI) clocked in at RM329 million.
The research arm of Kenanga Investment Bank Bhd (Kennaga Research) said the group’s RDI only met 44 per cent of its and consensus full-year estimates.
KLCC Stapled Group’s 1H17 net dividend per share (NDPS) of 16.1 sen was also below their expectations – meeting only 43 per cent of their FY17E NDPS of 37.1 sen.
While the group had missed its mark, Kenanga Research noted that its top-line and net profit were still considered to be within expectations as it met their full-year estimates at 47 per cent.
“We believe results missed out due to a lower ratio of RDI to net profit, which was 93 per cent in 1H17 versus our bullish expectations of 100 per cent,” they explained.
And in response to this development, the research arm has decided to adjust their RDI assumptions closer to the current 93 per cent of net profit – effectively lowering their earnings expectations for the group in FY17-18E by 7 and 6 per cent or RM700 and RM719 million, respectively.
Their FY17-18E NDPS were also adjusted to 34.5 and 35.4 sen, implying 4.4 and 4.5 yields.
For the group’s long-term outlook, Kenanga Research believed the group will remain on the lookout to further acquire assets as it has just renewed in April, 2017, its shareholders’ approval for a 10 per cent placement exercise.
Additionally, research arm also reported that the group has renewed the Menara ExxonMobil lease which was expiring at the end of Jan 2017, US oil giant ExxonMobil retaining 60 per cent of the building.
The remaining 40 per cent which was completed in 2Q17 has already received a tenant and will be contributing to the group fully from 3Q17 onwards.
All things considered, the research arm is still confident in the performance of KLCC Group due to its strong asset stability as most of its office assets are on long-term leases, and its high acquisition potential stemming from low gearing.