Is KLCC Stapled Group Attractive Right Now?

It’s not everyday you get to see value emerged from Bursa Malaysia especially when current market is fueled by speculations. KLCC Stapled Group is Malaysia’s first stapled trusts which comprise of KLCC Property Holdings and KLCC REIT.

The Group owns and manages 7 properties that are strategically located at the centre of Kuala Lumpur. Some of its most notable properties includes the Petronas Twin Towers, Suria KLCC, Menara Maxis, Menara Exxonmobil and Mandarin Oriental, etc.

Recently, its share price has been under some heavy sell-off from its peak of RM8.00 to RM7.11 per share at the time of writing.

Price Chart 1

While the Group’s business performance was underperforming due to the on-going Covid-19 outbreaks in Malaysia, the sell-off seems to be unrelated to its business performance. Rather, it is caused by the Group’s major shareholder – Petroliam Nasional Bhd (PETRONAS).

According to the Group’s announcement to Bursa, PETRONAS has sold 154m shares on 11 Dec 2020. The Edge Markets reported that the sell-off was at RM7.12 per share which was discounted by 5.7% from its closing price of RM7.55. This was probably for fund raising purposes as PETRONAS is paying dividend to our Federal Government.

With such discounted price, it also means that the sell-off is not through the open market. According to KLCC’s announcement to Bursa, Amanahraya Trustees Berhad – Amanah Saham Bumiputera has on 11 Dec 2020 bought 58.35m shares of KLCC. Probably they are one of the counterparties that bought the shares from PETRONAS.

VALUATION – DIVIDEND YIELD

Regardless, the sell-off has made KLCC’s valuation becomes attractive. Dividend investors would be happy to add more shares of KLCC into their portfolio. For the past 7 years, KLCC’s average dividend yield (DY) stood at 4.7% while its highest DY were at 5.25% which was during the 2018 sudden REITs sell-off. Today, KLCC DY were at its highest – 5.32% based on previous year’s dividend per share of RM0.38.

KLCC Chart 1

I did not take into account of current year dividend per share because of two reasons; 1) covid-19 outbreaks in year 2020 is a temporary issue which should not be taken into account in valuing a company for long-term investors; and 2) it’s not the full year dividend per share yet.

VALUATION – PB RATIO

KLCC’s DY was not the only valuation metric that shows value emerging. The Group’s PB Ratio also show that it is attractive. The average 7 years historical PB Ratio stood at 1.1x while its current PB Ratio is at 0.98x at the time of writing. This means the current share price is lower than KLCC’s net asset value.

KLCC Chart 2

MY INSIGHTS

The recent sell-off was not related to KLCC’s business performance but merely for PETRONAS to raise cash for dividend payment to Federal Government. If you’re a dividend investor, you should know that KLCC has been paying increasing dividend per share since 2013.

KLCC Chart 3

Of course, the year 2020 is an exceptional case because all businesses were affected by the Covid-19 outbreaks in Malaysia as well as globally. If you believe that this pandemic is a temporary issue like me, KLCC can be a good addition to your dividend portfolio.

One thing to note is that KLCC is not a growth stock but an income stock. As such, investors looking for capital gains will be disappointed by this counter as the share price performance has been hovering between RM7.50 to RM8.31 per share for the longest time.

Price Chart 2

Nevertheless, one cannot deny that KLCC is currently trading at slightly undervalue. A rare occasion indeed!

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DISCLAIMER: The above mentioned stock is NOT a recommendation to buy or sell but merely for education purpose. You should do your own due diligence on this company before making any investment decision. The author is not liable for your profit or losses made out of your decision to buy or sell.

The author has vested interest in the above mentioned stock. As such, his view might be biased.

 

Thomas Chua
An equity investor and co-founder of Stocks Insights. Prior to this, he was attached with medium-size audit firm for 2 years working as an external auditor where he have performed statutory audit on companies from various industries including oil & gas, retailers, manufacturing, industrial products & machinery, etc. He is also involved in Enterprise Risk Management exercise and the internal control framework review for entities undergoing a listing exercise on Bursa Malaysia and SGX Catalyst Board.

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