KLCCP Stapled Group (KLCC)’s net profit for 1HFY23 of RM361.4m met expectations, representing 50%/48% of Kenanga Research (Kenanga)’s full-year forecast/consensus full-year estimates.
“YoY, 1HFY23 revenue of RM775.4m grew by 15% mostly thanks to better contributions from hotel operations (+74%) with higher occupancy from domestic guests; and management services (+33%) as activities and car park income surged with the increase in overall foot traffic,” said Kenanga in the recent Results Note.
In spite of the higher revenue, pre-tax profit only rose by 12% as operating expenses increased from higher utility costs owing to ICPT adjustments. Overall, 1HFY23 net profits came in at RM361.4m (+11%).
With businesses now operating close to pre-pandemic levels, the earnings pattern seen in 1HFY23 is expected to hold up in the coming
quarters.
“During the first half of the year, retail footfall climbed by 48%, indicating that consumer spending is likely to remain robust (strong). It was
also supported by the rising moving annual turnover (MAT) of KLCC tenants by 37% in 1HFY23,” said Kenanga.
The research house opines that forward earnings will continue to be supported by the office division’s high occupancy rate, the retail division’s 12 new tenants that increased the mall’s occupancy rate during 2QFY23, the hotel operation’s stride to hopefully break even in the medium term as the occupancy ratio picks up, as well as the management services’ improved maintenance during the quarter with the rise in transient (+13% YoY) and season car park customers (16% YoY).
Meanwhile, the group has expressed interest in exploring global assets to add to its portfolio but would prioritise improving the efficiency of local operations first.
“We opine that the group’s target markets could be less affected by inflationary headwinds, proven by the increase in MAT reported by the
group,” said the research house, suggesting a Target Price of RM7.18 and the Outperform rating.
Risks to Kenanga’s call include bond yield expansion, lower-than-expected rental reversions, and lower-than-expected occupancy rates.
