KLCC: First Half Earnings Align with Forecasts, Outlook Remains Stable

MBSB Research notes that the stapled group’s first-half FY25 core net income aligned with both the research house’s and consensus estimates. Despite a sequential dip in Q2 earnings due to seasonal factors, the group demonstrated resilience, with its hotel division returning to profitability.

Performance Review

The group reported a 1HFY25 core net income of RM401.3 million, which came in within expectations, constituting 48% of MBSB Research’s full-year estimate and 46% of consensus forecasts. A distribution per unit (DPU) of 9.2 sen was declared for 2QFY25, bringing the total DPU for 1HFY25 to 18.4 sen.

Sequentially, 2QFY25 core net income saw a marginal decline of 1.4% quarter-on-quarter to RM200 million, while topline remained largely flat (+0.8% QoQ). This performance was primarily attributed to the normalization of earnings following a stronger 1QFY25, which benefited from the festive season. The retail division’s profit before tax (PBT) also saw a 4.5% QoQ decrease due to reduced shopper footfall post-festive period. Positively, the hotel division returned to profitability in 2QFY25, supported by higher occupancy rates and the completion of ballroom upgrading works in April 2025.

On a yearly basis, 2QFY25 core net income grew by 4.6% year-on-year, pushing 1HFY25 core net income up by 5.9% YoY. This improvement was largely driven by stronger contributions from the retail and office segments, which compensated for losses incurred by the hotel division during the first half. The retail division’s PBT increased by 3.4% YoY, aided by positive rental reversion and the acquisition of the remaining 40% stake in Suria KLCC in April 2024. The office segment’s contribution remained stable due to long-term lease agreements.

Challenges and Outlook

While the hotel division reported a pre-tax loss of RM3.9 million in 1HFY25, primarily due to lower food and beverage demand and earlier ballroom upgrading disruptions, its sequential recovery points to improving conditions.

MBSB Research is maintaining its NEUTRAL call on the group with an unchanged target price of RM8.40. The research house also retained its earnings forecasts for FY25/26/27. The outlook for the group is expected to remain stable, underpinned by consistent contributions from office assets and anticipated earnings growth from positive rental reversion in the retail division. The estimated distribution yield stands at 4.9%. Overall, MBSB Research notes that upside for the group is limited.