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Tuesday, December 18, 2012

Affin Research maintains Buy on KLCC Property


KUALA LUMPUR: Affin Investment Research is maintaining a Buy recommendation on KLCC Property Holdings Bhd (KLCCP) with a revised target price of RM7 from RM7.10.
It said on Tuesday it was changing its valuation methodology for KLCCP to a two-stage DDM model (from implied yield target), to be in line with the valuations of other MREITs under its coverage.
“Assuming a cost of equity of 8.2%, 5.5% dividend growth rate for the next five years and a terminal growth rate of 3.5%, we now value KLCCP at RM7.00 (from RM7.10),” it said.
Affin Research said its prior target price, upgraded on Nov 28, had already taken into account the restructuring exercise.
“At our target price of RM7, KLCCP would be valued at 19.9 times CY13 EPS and 4.5% dividend yield, which is approximately 10%-15% premium to our fair value of IGB REIT and Pavilion REIT.
“The premium, in our view, is justifiable given the above-mentioned qualities. Maintain BUY. Further re-rating catalysts are completion and listing of KLCCP Stapled Group and better-than-expected earnings/ dividend payout,” said the research house.

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