PP 7767/09/2010(025354)

18 May 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

18 May 2010
KLCC Property
MARKET DATELINE

Share Price : RM3.29

Fair Value : RM3.80
Normalised FY03/10 Pretax Profit Grows 7.2% 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 13.7 - 5.6 0.8 4.7 0.3 3.2
2010# 881.3 235.2 25.2 5.0 13.1 22.0 2.7 0.6 12.2 0.3 3.3
2011f 978.8 245.8 26.3 4.5 12.5 24.0 6.3 0.6 4.5 0.3 3.3
2012f 1057.3 255.2 27.3 3.8 12.0 25.0 5.6 0.5 4.6 0.3 3.3
Main Market Listing /Trustee Stock/ Syariah Approved Stock By The SC # Normalised * Consensus Based On IBES Estimates
RHBRI Vs. Consensus
Above
♦ Within expectations. FY03/10 results came in within expectations.
In Line
Normalised FY03/10 pretax profit (excluding RM758m revaluation gains) grew
Below
7.2% driven by: (1) Higher rentals from the retail mall and office buildings; (2)
Higher contribution from the car park operations; and (3) Lower operating costs Issued Capital (m shares) 934.1
and interest expenses. These were partly offset by a decline in hotel revenue Market Cap(RMm) 3073.1
Daily Trading Vol (m shs) 3.12-3.57
due to the weak economic condition and the H1N1 outbreak. The company has
52wk Price Range (RM) 0.5
proposed final net dividend of 6 sen in 4Q10, bringing FY10 total net dividend
Major Shareholders: (%)
to 11 sen, translating to a 3.3% yield. This is in line with our expectation.
PETRONAS 51.0
♦ Conversion of RCULS from its major shareholder after completion of Lot EPF 9.9

C development? The company is still unsure if major shareholder KLCC

Holdings S/B (KLCCH) will exercise its rights to convert its RCULS in KLCC to
new shares that will result in a massive 25-30% EPS dilution to KLCCP (as FYE Mar FY10 FY11 FY12
KLCCP’s share base will be enlarged from the existing 934.1m to 1.3bn shares). EPS chg (%) - 2.0 2.0
Var to Cons (%) - 9.6 9.3
The company believes KLCCH is mindful of the massive EPS dilution and will
ensure a fine balance is struck between controlling and minority shareholders. PE Band Chart
We expect the conversion would only happen from FY03/13 onwards when
dilution can be cushioned by new rental incomes from the Lot C development
PER = 16x
(840,000 sq.ft office and 140,000 sq.ft. retail).
PER = 13x
PER = 10x
♦ Near-term catalysts from positive rental revisions. We project 3.8-4.5%
earnings growth rates between 2011-2012 driven by: (1) The first full-year
impact from the rental revision of Petronas Twin Tower in end 09, from RM8.70
psf to RM9.10 psf; (2) 3-month contribution from Lot C’s retail portion; and (2)
better occupancy rate for Mandarin Oriental on improving economic outlook.
Relative Performance To FBM KLCI
♦ Risks. The risks include: (1) A slow pick-up in office demand; (2) Lower tourist
arrival due to the H1N1 outbreak; (3) Oversupply of office and retail space in
FBM KLCI
the Klang Valley; and (4) EPS dilution from the conversion of RCULS by the
major shareholder.

♦ Forecast. FY11-12 earnings forecasts are tweaked up by 2%, having updated

KLCC Property
the latest balance sheet numbers. RNAV has also been raised from RM4.05 to
RM4.47 having reflected the revaluation surplus.

♦ Maintain Market Perform. Indicative fair value has been raised to RM3.80
(from RM3.64) at a 15% discount to its RNAV/share of RM4.47.
Joshua CY Ng
(603) 92802237
Please read important disclosures at the end of this report. joshuang@rhb.com.my

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Table 2. KLCCP Quarterly Results

QoQ YoY
FYE Mar (RMm) 4Q09 3Q10 4Q10 FY09 FY10 YoY (%) Comments
(%) (%)
Turnover 211.6 223.7 225.6 0.9 6.6 861.2 881.3 2.3 Yoy growth was due to higher
rental income of the company’s
office properties (especially
Menara ExxonMobil and Dayabumi)
and retail mall, thanks to higher
rental rates. This was partly offset
by reduction in revenue from its
hotel asset. However, the hotel
business has picked up since
2QFY03/10 from RM4.7m to
RM7.7m in 4QFY03/10.
EBIT 155.2 159.8 163.3 2.2 5.3 627.5 646.9 3.1 Better operating margins of 73.4%
in 4QFY03/10, from 72.9% in FY09
due to cost rationalisation
exercise.
Net int inc/(exp) (33.3) (32.4) (30.3) (6.8) (9.2) (139.9) (129.9) (7.2) Net gearing reduced from 0.30x in
3Q10 to 0.26x in 4Q10.
Associates 28.8 2.6 8.8 >+100 (69.2) 36.2 16.4 (54.6)
Fair value 508.4 0.0 758.0 Na 49.1 508.4 758.0 49.1
adjustment
Pre-tax profit 659.0 130.0 899.9 >+100 36.6 1,032.2 1,291.5 25.1 Excluding RM758m revaluation
gains, FY03/10 PBT was
RM533.5m. This was within our
and consensus estimates.
Taxation (104.2) (33.2) (72.6) >+100 (30.4) (195.4) (173.4) (11.3)
Minorities (192.3) (37.6) (360.1) >+100 87.3 (301.1) (470.5) 56.3
Net profit 362.5 59.2 467.2 >+100 28.9 535.7 647.6 20.9
Net EPS (sen) 28.1 4.6 36.1 >+100 28.8 41.6 50.2 20.7
NDPS (sen) 5.5 0.0 6.0 Na 9.1 10.5 11.0 4.8 In line with our expectation.
NTA per share (RM) 4.4 4.5 5.0 16.3 18.3

Margins (%)
EBIT 73.3 71.4 72.4 72.9 73.4
Pretax 311.5 58.1 398.9 119.9 146.5
Net profit 171.3 26.5 207.1 62.2 73.5
Tax rate (15.8) (25.5) (8.1) (18.9) (13.4)

Table 3. Earnings Forecasts

FYE Mar (RMm) FY09 FY10 FY11F FY12F
Revenue 861.2 881.3 978.8 1057.3
Operating profit 627.5 646.9 713.3 784.0
Interest cost (139.9) (129.9) (137.1) (137.5)
Exceptional Gain 508.4 758.0 0.0 0.0
Associate 36.2 16.4 15.5 16.0
Pretax profit 1032.2 1291.5 591.7 662.5
Tax (195.4) (173.4) (147.9) (165.6)
Minority interest (301.1) (470.5) (198.0) (241.7)
Net profit 535.7 647.6 245.8 255.2
Normalised net profit ^ 224.0 235.2 245.8 255.2
EPS (sen) 24.0 25.2 26.3 27.3
DPS (sen) 10.5 11.0 11.0 11.0
^ estimated
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 5,500.0 5,500.0 50.5 0.0

Suria KLCC* 1,048,583.0 3,300.0 3,300.0 60.0 0.0
Mandarin Oriental 643^^ 552.6 514.4 75.0 (28.6)
Menara Exxon Mobil* 379,930.0 425.0 425.0 100.0 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 12,298.4 12,769.4 480.5
Shareholder Funds as at 31 Mar 10 5,312.2
Existing share cap (m shares) 934.1
RNAV/ share (RM) 6.20
plus RCULS 1,294.7
Fully diluted RNAV/ share (RM) 4.47
^^ total number of room

* revalued at 1 mar 10
# development cost of RM665 psf for Lot C and assuming RM600 psf for Lot D

Source: KLCCP, RHBRI

IMPORTANT DISCLOSURES
This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
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“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
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services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

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

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.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities,
subject to the duties of confidentiality, will be made available upon request.

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actions of third parties in this respect.

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