Three broking house have maintained their NEUTRAL calls on KLCC Property Holdings Bhd (KLCCP), with target prices of RM8.52 and RM8.40, respectively, as the research houses expect steady earnings growth supported by the retail and hospitality segments.

RHB Research noted that KLCCP’s fiscal year of 2024 (FY24) results were in line with expectations, with stronger year-on-year (YoY) earnings driven by retail and hospitality. The office segment remained stable due to its long-term triple net leases, with further upside anticipated in FY25 from an upward rental reversion for PETRONAS Twin Towers in October 2024. With a gearing ratio of just 32%, RHB Research said potential acquisitions could further drive inorganic growth.

The group’s fourth quarter of 2024 (4Q24) core profit of RM196.2 million declined 5% quarter-on-quarter but increased 21% YoY, coming in at 98%-97% of RHB Research’s and consensus full-year estimates. The earnings growth was attributed to KLCCP’s full acquisition of Suria KLCC, which reduced minority interest charges, alongside higher revenue from retail and hospitality. The average cost of debt fell to 4.01% from 4.55% after the refinancing of RM1.05 billion in sukuk. A dividend of 44.5 sen was announced for the year, up from 40.5 sen in FY23.

MIDF Research also highlighted KLCCP’s stable earnings outlook, noting that its FY24 core net income of RM782.3 million met expectations, representing 96%-97% of full-year projections. While sequential 4QFY24 core net income dipped 4.8% due to slightly weaker contributions from the retail and hotel divisions, it grew 9.4% YoY, lifting full-year earnings by 7.7%. The firm attributed this growth to KLCCP’s acquisition of the remaining 40% stake in Suria KLCC in April 2024, along with the recovery in the hotel segment, driven by improved occupancy rates and room rates at Mandarin Oriental.

Suria KLCC continued to perform well despite growing competition from new malls in the city centre. RHB Research observed a 7% increase in revenue and 9% higher profit before tax for FY24, underpinned by a higher occupancy rate of 99% (FY23: 96%) and single-digit rental reversions. While annual tenant sales declined 7% from a high base in FY23, footfall remained robust, rising 4% YoY. The group also introduced 28 new tenants, including five first-to-market brands.

The office division remained stable, with only marginal growth in revenue and profit before tax, but analysts expect better performance in FY25 following the positive rental reversion at Petronas Twin Towers. Meanwhile, Mandarin Oriental saw its FY24 profit before tax quadruple to RM12 million from RM3 million in the previous year, supported by a 14% rise in revenue and a 21% increase in revenue per available room to RM610.

Both research houses revised their earnings forecasts, with RHB Research trimming its FY25-FY26F estimates by 1%-1.5% while adjusting its long-term rental reversion assumptions. MIDF Research fine-tuned its FY25-FY26F earnings downward by 5.7%-5.8% after its FY24 results.

Source: Suria KLCC Remains Strong Despite Nearby Competition