KLCCP’s Suria KLCC deal a win

Flowering inflatables: Visitors posing for photos in front of giant 'blooms' under a clear, blue sky at Suria KLCC, Kuala Lumpur. — LOW LAY PHON/The Star

PETALING JAYA: KLCCP Stapled Group’s acquisition of the remaining 40% equity interest in Suria KLCC Sdn Bhd (Suria KLCC), which owns and manages Suria KLCC Mall, for RM1.95bil is viewed positively by analysts.

KLCCP Stapled Group announced that KLCC Property Holdings Bhd had on Jan 26, 2024 entered into a share purchase agreement with existing shareholders of Suria KLCC, namely, Ocmador (M) City Retail Centre Sdn Bhd, Port Moresby Investment Ltd and Bold Peak Sdn Bhd and CBRE Asia Retail Fund Ltd as seller’s guarantor for the proposed acquisition by KLCC Property of a 40% equity interest in Suria KLCC not already owned by KLCC Property for RM1.95bil.

Suria KLCC is currently a 60% owned subsidiary of KLCC Property. Upon completion of the proposed acquisition, Suria KLCC will become a wholly-owned subsidiary of KLCC Property. The proposed acquisition is expected to be completed by the second quarter of the financial year 2024 (2Q24).

MIDF Research said it views the acquisition positively as the full ownership of Suria KLCC will solidify KLCCP Stapled Group’s portfolio and expand contribution from the retail segment.

The retail segment is the group’s second largest earnings contributor in the nine-month period of FY23 by contributing 41% to operating profit, while the office segment is the largest earnings contributor which contributed 50% to operating profit.

“Meanwhile, Suria KLCC Mall which is strategically located at KLCC had a high occupancy rate of 98% as of December 2023. Shopper footfall of Suria KLCC Mall has been recovering post the reopening of country borders as it is one of the tourist hotspots in Malaysia,” the research house said in a report yesterday.

MIDF Research said the purchase price of RM1.95bil for the 40% stake in Suria KLCC values Suria KLCC at RM4.9bil, which is lower than market value of Suria KLCC Mall of RM5.6bil as of Dec 31, 2023.

“Meanwhile, we estimate net acquisition yield to be attractive at 6.9% based on a net profit of RM335mil recorded in FY22. KLCC Property intends to fund the acquisition via borrowings.

“Post-acquisition, we estimate gearing of KLCCP Stapled Group to increase to 0.21 times from 0.13 times as of 3Q23,” it said, maintaining a “neutral” call on KLCCP Stapled Group with a target price of RM7.20.