Although KLCC Property Holdings Bhd Stapled Group (KLCCP) has reported solid earnings of RM429.6 million for its third quarter ended Sept 30, 2024 (3Q24), MIDF Amanah Investment Bank Bhd (MIDF Research) has maintained a NEUTRAL call on KLCCP Stapled Group (KLCCP) with an unchanged target price of RM7.80.

The group's core net income for the first nine months of the financial year reached RM585.6 million, making up 72% and 73% of MIDF Research's and consensus' full-year forecasts, respectively. The earnings were supported by higher contributions from the retail and hotel segments, which saw improvement in foot traffic and occupancy rates.

KLCCP's solid performance in 3QFY24 was driven by an 8.1% sequential increase in core net income to RM206.5 million, supported by better retail performance and the return to profitability for the Mandarin Oriental KL hotel. The retail division benefitted from positive rental reversions, while the hotel division's growth was attributed to higher occupancy rates.

The acquisition of the remaining 40% stake in Suria KLCC in April 2024 also bolstered retail earnings. Year-on-year (YoY), 3QFY24 core net income rose 11.4%, further lifting 9MFY24's total earnings by 7.1%.

However, while the retail and hotel divisions experienced growth, higher financing costs (45% YoY) from the acquisition of the remaining Suria KLCC stake partially offset the earnings gains. Despite this, the office division maintained a stable contribution, benefitting from long lease agreements on its office buildings.

MIDF Research has not altered its earnings forecast for KLCCP for FY24F, FY25F and FY26F as it expects the group's earnings to remain steady. The positive outlook for Suria KLCC and Mandarin Oriental KL is expected to continue in FY25, driven by higher tourist arrivals, while contributions from the office segment are likely to remain stable due to the long-term nature of lease agreements.