Date: October 2, 2024
Broker: Maybank Investment Bank Berhad

Overview
KLCCP Stapled Group (KLCCSS MK) is a major player in the Malaysia REIT sector, with a strong focus on office and retail properties. It is recognized for its stable earnings, driven by long-term and triple-net lease agreements for its office assets, ensuring consistent income and lower tenancy risks.

Stock Performance and Target Price

• Current Price (CP): MYR7.83
• Target Price (TP): MYR7.52
• Market Capitalization: USD 3,394 million
  KLCCP is rated as a HOLD, reflecting the expectation of stable but limited upside in the near term.

Earnings Forecast and Dividend Yields

• 2024 Core Earnings Growth: 20.8%
• 2025 Core Earnings Growth: 19.9%
• 2024 Dividend Yield: 4.8%
• 2025 Dividend Yield: 5.0%

KLCCP shows a stable earnings outlook, with high occupancy rates in its premium office and retail spaces. The expected core earnings growth for 2024 and 2025 signals strong underlying business performance.

Debt Profile and Financing Costs

• Total Debt: MYR4.32 billion
• Floating Rate Debt: 9% of total debt
• Gross Gearing: 24%

KLCCP maintains a conservative debt profile, with only 9% of its total debt subject to floating interest rates, thus minimizing exposure to interest rate volatility. Its gross gearing ratio is also modest at 24%.

Occupancy Rates of Key Properties
KLCCP’s properties, particularly its office assets, are known for their exceptionally high occupancy rates due to long-term leases with high-quality tenants. Key occupancy rates include:

• PETRONAS Twin Towers: 100%
• Menara 3 PETRONAS: 100%
• Menara ExxonMobil: 100%
• Menara Dayabumi: 100%
• Suria KLCC (Retail): 98%

KLCCP’s premier assets, such as the PETRONAS Twin Towers and Suria KLCC, maintain full or near-full occupancy, contributing significantly to its stable income.

Retail Segment Outlook
KLCCP’s retail asset, Suria KLCC, remains a top performer, with a high occupancy rate of 98%. The retail space benefits from its prime location and strong demand, which enables it to sustain high occupancy rates and positive rental reversions.

Investment Thesis
KLCCP is well-positioned in the market, with its diversified portfolio of long-term office leases and prime retail assets providing steady and recurring income. Its low gearing, strong tenant base, and high occupancy rates make it a defensive and resilient stock, particularly in challenging economic environments. The group’s consistent dividend payouts further enhance its attractiveness for income-focused investors.

This analysis offers a detailed view of KLCCP’s performance and outlook as of October 2, 2024.