KLCCP’s retail business on recovery track, office segment to stay stable
KUCHING: KLCCP Stapled Group’s (KLCCP) retail business remains on a recovery track, analysts note, while the office segment’s contribution is expected to stay stable.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) gathered from the company that tenant sales, up 127 per cent year on year (y-o-y) in the second quarter of financial year 2022 (2QFY22), has surpassed the pre-Covid levels (at 116 per cent).
However, Kenanga Research noted that footfall (up 198 per cent y-o-y in 2QFY22) is still approximately 30 per cent below the pre-Covid threshold.
“This suggests that the performance of its retail business (with its occupancy standing at 92 per cent in the first half of FY22 (1HFY22) versus 1HFY21’s 94 per cent) remains on a recovery track, notwithstanding the possible disruptions arising from the ongoing concerns of rising inflationary environment and recession fears,” the research arm said.
“As for the office segment (which is backed by long-term, locked-in leases with high quality tenants and enjoying occupancy rate of 100 per cent), its contribution is expected to stay stable.
“And on account of higher occupancy rate (which will likely climb further from 32 per cent in 1HFY22 versus 14 per cent in 1HFY21), the hotel operation will strive to break even in 4QFY22.”
To note, KLCCP’s 1HFY22 net profit of RM326.6 million accounted for 47 per cent and 49 per cent of Kenanga Research’s and consensus estimates, respectively,
“Following KLCCP’s 1HFY22 results, we have adjusted our net profit forecasts to RM678 million (-3 per cent) for FY22 and RM726 million (+1 per cent) for FY23 after tweaking our assumptions.”
Correspondingly, the research arm’s FY22 and FY23 dividend per share (DPS) were revised to 33.1 sen (from 32.4 sen) and 36.3 sen (from 33.3 sen) respectively, which imply yields of 4.8 per cent-5.2 per cent.
Meanwhile, for the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), it made no changes to its earnings forecast for FY22-23F.
As such, MIDF Research’s core net income forecast for FY22-23F remained at RM708 million and RM761 million, respectively.
To recap, KLCCP’s 1HFY22 core net income also came in within MIDF Research’s expectations, making up 46 per cent and 49 per cent of the research arm’s and consensus full year estimates respectively.
“We continue to expect earnings recovery for KLCCP in FY22-23F as retail division will be supported by reopening of economic activity,” MIDF Research said.
“Besides, reopening of borders is expected to support recovery of hotel division in 2HFY22 and FY23 as a result of higher tourist arrival.
“We opine that hotel division may breakeven in 4QFY22 and contribute positively to KLCCP from FY23 onwards.”