Lower third quarter profits for KLCCP amidst pandemic impact
KUCHING: Real estate investment trust (REIT) player KLCC Property Stapled Group (KLCCP) posted a lower net profit of RM135.39 million in the third quarter ended Sept 30, 2021 (Q3FY21) from RM156.66 million a year before amid Covid-19 adverse impact.
Revenue was lower by 17 per cent at RM260.35 million from RM312.60 million after a weak performance of its hotel and retail segments following restrictions imposed to curb the spread of the pandemic, it said in a filing with Bursa Malaysia.
It said Suria KLCC and the retail podium of Menara 3 Petronas under the retail segment registered a decline of 36 per cent in revenue due to lockdown, higher provision of tenant assistance and lower advertising income.
KLCCP Stapled Group said the situation, however, improved following the transition to Phase 2 of the National Recovery Plan in September with Suria KLCC recorded an increase in footfall, reaching 86 per cent compared to the previous month.
“The gradual relaxation also saw tenant sales more than doubled compared to August, led by fashion, leisure and jewellery,” it said.
It said the hotel segment represented by Mandarin Oriental Hotel posted a loss of RM20 million amid reduced occupancy rate and lower food and beverages sales.
“Occupancy rate hit 30 per cent during weekends during NRP transitions,” it said.
Hong Leong Investment Bank Bhd (HLIB Research) estimated that KLCCP’s retail occupancy fell to 93 per cent from 97 per cent in the same period last year, while hotel occupancy dropped to 11.7 per cent from 21 per cent.
“We expect a stronger 4Q to be driven from the transition of NRP Phases, paired with festivities seasons. We are hopeful, as we understand since Phase 2 started, retail footfall has recovered to 30 to 40 per cent of pre-pandemic levels, and with the allowable interstate travel, hotel occupancy has seen tremendous improvement.
“We like KLCCP given its resilient office segment, prime location retail and Shariah compliant scarcity amongst REITs.”
Meanwhile, researchers with Kenanga Investment Bank Bhd (Kenanga Research) believed the group’s main driver, the office segment, remains extremely stable on long-term leases of more than 15 years.
“Retail and hospitality segments have been challenging in 9MFY21 but 4QFY21 is expected to see a turnaround in line with the reopening of the economy and year-end festivities and holidays,” it said.
“The group are actively securing most of the tenants for the retail space (Suria KLCC will see circa 30 per cent of leases up for expiry in FY21) and we are expecting flattish to mildly positive reversions going forward.
Meanwhile, its office assets have locked in long-term leases with the recent extension of the Triple Net Lease (TNL) agreements for Petronas Twin Towers and Menara 3 Petronas for a further 15 years to 2042, reinforcing its revenue stability, with Menara ExxonMobil securing lease renewal for the next three years of its 18-year lease tenure.