KLCCP’s hospitality segment likely to face large portion losses this year, says RHB Retail Research

By Poovenraj Kanagaraj

Research house, RHB Retail House says KLCCP Stapled is still confident in its office segment. The steady reopening of Suria KLCC post MCO may increase earnings however RHB expresses weariness on reversion rates going forward.

Approximately 60 percent of leases are expected to open by next week as compared tot the 12 percent that were operating during the Movement Control Order (MCO).

“While management acknowledges the Government’s call to provide rebates to SME tenants, the general approach has been to uphold obligations under the lease agreements and only grant such assistance to qualifying tenants,” the research house said.

In its trading notes, RHB noted that 20 percent of the tenants at Suria are deemed as SMEs with most of them as F&B players.

While KLCCP has expressed confidence in its office segment, RHB reiterates its concerns for the hospitality segment which is likely to be in losses for a large portion of the year.

“We think occupancy rates will struggle for the rest of the year as fears on travel and being in crowded areas for events may linger post-MCO,” it said.

However, RHB opines that the office segment should be able to mitigate the poor performance of the hotel segment, albeit at a flattish growth rate.

KLCCP’s management has maintained a cautious undertone, where the DPU drop from 8.80 sen to 8.30 sen in 1Q20 to be a slight cause for concern.

Activities related to acquisition takes a back seat as focus shifts to survival rather than growth for the time being.

“We cut our FY20-22F earnings by 1-3%, lowering our DDM-based TP to RM 8.43,” the research house said.

According to The Malaysian Reserve, the group, comprising of KLCC Property Holdings Bhd and KLCC Real Estate Investment Trust (KLCC REIT), reported flattish revenue of RM354.59 million during the quarter against RM353.45 million a year ago.

“In the hotel segment, the quarterly performance of Mandarin Oriental Kuala Lumpur was severely impacted by the Covid-19 outbreak which saw year-on-year revenue decline 33.8% to RM28.1 million, resulting in a loss for the hotel,” the group said in a Bursa Malaysia filing.

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