Tuesday, September 27, 2011

KLCC Property Earnings Review: Overweight: Refinancing Its Debt

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

# 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.

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

No change.

Rating - HOLD
- 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.

- Uncertainty over extent of dilutive impact from RCULS.

# 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


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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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