PP 7767/09/2010(025354)

1 March 2010
Corporate Highlights
Malaysia RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
R e su lt s N o te Company No: 233327 -M

1 March 2010
KLCC Property
MARKET DATELINE

Share Price : RM3.27

Fair Value : RM3.64
No Surprises Recom : Market Perform
(Maintained)

Table 1 : Investment Statistics (KLCCP; Code: 5089) Bloomberg: KLCC MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/CF P/NTA ROE Gearing NDY
Mar (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2009# 861.2 224.0 24.0 6.2 13.6 - 5.6 0.8 4.7 0.3 3.2
2010f 938.1 240.1 25.7 7.2 12.7 23.0 6.8 0.6 4.9 0.3 3.4
2011f 985.8 246.1 26.3 2.5 12.4 25.0 6.3 0.6 4.9 0.3 3.4
2012f 1091.5 277.1 29.7 12.6 11.0 26.0 5.3 0.6 5.3 0.3 3.4
Main Market Listing /Trustee Stock/ Syariah Approved Stock By The SC # Normalised * Consensus Based On IBES Estimates
RHBRI Vs. Consensus
♦ Within expectations. KLCCP reported 9MFY03/10 normalised net profit of Above
RM180.3m (+4.2% yoy). This accounted for 75% and 74% of RHBRI and In Line
consensus estimates, respectively. The yoy earnings growth was mainly Below
due to: a) higher rental of office buildings; b) increased rental rate of the
Issued Capital (m shares) 934.1
retail mall; c) higher contribution from the car park operations; and d) Market Cap(RMm) 3054.4
lower operating costs arising from cost rationalisation exercise as well as Daily Trading Vol (m shs) 2.80-3.57
lower interest expenses. All these have aided to offset the drop in hotel 52wk Price Range (RM) 0.6
operation (lower occupancy rate due to weak economic environment and Major Shareholders: (%)
H1N1 outbreak). On qoq basis, the company’s net profit recorded a PETRONAS 51.0
marginal 2.5% drop to RM59.2m, mainly due to higher utilities incurred in EPF 9.9

its retail division.

Meanwhile, no dividend was declared for the quarter. FYE Mar FY10 FY11 FY12
EPS chg (%) - - -
Var to Cons (%) 11.7 5.4 14.1
♦ The earnings catalysts. Rental revision of Petronas Twin Tower in Nov 09
will boost the company’s 4Q10 earnings performance. Over the longer PE Band Chart
term, Lot C, a 59-storey office cum retail building comprising NLA of about
980,000 sq.ft. will be the key earnings booster for KLCCP. We understand
PER = 14x
that the retail portion (140,000 sq.ft.) will commence operation by Oct PER = 12x
2010 and significant impact would be felt from 2012 onwards. As for the PER = 10x

office portion (840,000 sq.ft.), it is expected to be completed by CY2011.

The rental rate is estimated at around RM8.15 psf.

♦ Risks. The risks include: a) slow pick-up in office demand due to cautious
expansion by business entities; b) lower tourist arrival from future
Relative Performance To KLCI
potential outbreak; and c) rising competition due to increasing office and
retail malls supply in the Klang Valley.
KLCC Property

♦ Forecast. No change to our FY10-12 earnings forecasts. FBM KLCI

♦ Investment case. Our indicative fair value is maintained at RM3.64, or

10% discount to its RNAV/share of RM4.05. In view of implied capital gain
of 11.5% (in line with market return of 10.2%), we are maintaining our
Market Perform rating on the stock.

Please read important disclosures at the end of this report.

Low Yee Huap, CFA
(603) 92802237
low.yee.huap@rhb.com.my

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Table 2. KLCCP Quarterly Results

QoQ YoY
FYE Mar (RMm) 3Q09 2Q10 3Q10 9M09 9M10 YoY (%) Comments
(%) (%)
Turnover 218.8 215.0 223.7 4.0 2.2 649.6 655.7 0.9 Qoq growth was attributed to
higher rental rate of the retail mall
and higher revenue from the car
park operations as well as hotel
division.
EBIT 157.8 161.5 159.8 (1.0) 1.3 472.3 483.6 2.4 EBIT margin dropped from 75.1%
in 2Q10 to 71.4% in 3Q10 due to
higher utilities cost from the retail
division.
Net int inc/(exp) (34.9) (33.5) (32.4) (3.2) (7.0) (106.6) (99.6) (6.5) Net gearing is maintained at
around 0.30x in 3Q10.
Associates 2.5 2.5 2.6 3.3 4.6 7.4 7.6 1.8
Fair value adjutment 0.0 0.0 0.0 Na Na 0.0 0.0 Na
Pre-tax profit 125.4 130.5 130.0 (0.4) 3.7 373.2 391.5 4.9
Taxation (30.4) (33.3) (33.2) (0.4) 9.3 (91.2) (100.8) 10.5
Minorities (36.1) (36.4) (37.6) 3.1 4.0 (108.9) (110.4) 1.4
Net profit 58.9 60.7 59.2 (2.5) 0.6 173.1 180.3 4.2 Within our and consensus
estimates.
Net EPS (sen) 4.6 4.7 4.6 (2.3) 0.4 13.6 14.1 3.9
NDPS (sen) 0.0 5.0 0.0 Na Na 5.0 5.0 0.0
NTA per share (RM) 4.0 4.4 4.5 4.0 4.4

Margins (%)
EBIT 72.1 75.1 71.4 72.7 73.7 Qoq drop due to higher utilities
incurred in Suria KLCC.
Pretax 57.3 60.7 58.1 57.4 59.7
Net profit 26.9 28.3 26.5 26.6 27.5
Tax rate (24.2) (25.5) (25.5) (24.4) (25.7)

Table 3. Earnings Forecasts

FYE Mar (RMm) FY09 FY10F FY11F FY12F
Revenue 861.2 938.1 985.8 1,091.5
Operating profit 627.5 677.7 719.9 818.2
Interest cost (139.9) (138.7) (143.3) (142.6)
Exceptional Gain 508.4 0.0 0.0 0.0
Associate 36.2 15.1 15.5 16.0
Pretax profit 1032.2 554.1 592.1 691.6
Tax (195.4) (138.5) (148.0) (172.9)
Minority interest (301.1) (175.6) (198.0) (241.7)
Net profit 535.7 240.1 246.1 277.1
Normalised net profit 224.0 240.1 246.1 277.1
EPS (sen) 57.4 25.7 26.3 29.7
DPS (sen) 10.5 11.0 11.0 11.0
Source: Company data, RHBRI estimates

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Table 4 : Estimated RNAV per share for KLCCP

KLCC investment properties NLA psf Book cost Market value Stake Surplus
(RMm) (RMm) (%) (RMm)
PETRONAS Twin Towers* 3,195,544.0 5,100.0 5,100.0 50.5 0.0
Suria KLCC* 1,048,583.0 2,950.0 2,950.0 60.0 0.0
Mandarin Oriental* 643^^ 552.6 514.4 75.0 (28.6)
Menara Exxon Mobil* 379,930.0 417.0 417.0 100.0 0.0
Dayabumi* 678,974.0 400.0 400.0 100.0 0.0
Menara Maxis 528,000.0 650.0 650.0 33.0 0.0
Lot C # 980,000.0 803.2 980.0 100.0 176.8
Lot D # 1,000,000.0 667.6 1,000.0 100.0 332.4
Total 11,540.4 12,011.4 480.5
Shareholder Funds as at 31 Mar 09 4,762.7
Existing share cap (m shares) 934.1
RNAV/ share (RM) 5.61
plus RCULS 1,294.7
Fully diluted RNAV/ share (RM) 4.05

^^ total number of room

* revalued at 30 Jan 09
# development cost of RM665 psf for Lot C and assuming RM600 psf for Lot D

Source: KLCCP, RHBRI

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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

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Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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