Tuesday, September 27, 2011

KLCC Property Earnings Review: Overweight: Refinancing Its Debt

27 September 2011
Price Target: RM3.46
Share price: RM2.95


News
# KLCC’s 50.5% owned subsidiary, Midciti Resources Sdn Bhd has agreed to fully repay its bonds outstanding to parent company PETRONAS, at a premium of RM35.31m.

# The bonds in question are the RM199m secured Bai Al-Dayn Bonds and the RM600m 13-year bond, due in Nov 2011 and Nov 2012 respectively.

# The purchases of the existing bonds are to be funded entirely via the proceeds to be raised from Midciti’s proposed issuance of a RM880m Sukuk.

Financial Impact
Uncertain. We estimate interest costs for these two bonds to be in the region of RM67m, or 47% of last year's total financing costs. However, the interest rate for the new RM880m, 10-year sukuk have yet to be announced.

Pros / Cons
Mildly positive as we believe management is likely to be motivated by the opportunity to refinance existing debt at more attractive rates, apart from extending the repayment timeline.

Risks
38% EPS dilution from RCULS conversion by the parent company, KLCC Holdings.

Forecasts
No change.

Rating - HOLD
Positives
- High occupancy rates (>90%), consistently strong human traffic and desirable tenant profile due to prestigious and desirable KLCC address.
- Stability of rental yield and scope for capital appreciation.

Negatives
- Uncertainty over extent of dilutive impact from RCULS.

Valuation
# In the absence of major catalysts, we maintain our HOLD rating and target price of RM3.46 (15% discount to RNAV).

# The RCULS issue needs to be resolved before KLCC Property can enjoy re-rating.



Source: HLIB Research

2 comments:

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  2. Thank you for posting this great info. I didn't know that there will be a 38% EPS dilution from RCULS conversion by the parent company, KLCC Holdings.

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