KUCHING: KLCC Property Holdings Bhd’s (KLCCP) asset quality of its property portfolio remains strong.
Following a company’s visit, the research arm of CIMB Investment Bank Bhd (CIMB Research) in a report said two of the buildings in the company’s portfolio, Menara ExxonMobil and Menara 3 located in the vicinity of Kuala Lumpur City Centre still look new despite its age.
The research firm said Menara ExxonMobil, which was built in 1996 and fully tenanted by ExxonMobil is well maintained despite being constructed for more than 17 years.
Meanwhile, the tenancy of the building will be expiring in 2017 and the research firm gathered that KLCCP has begun negotiations on the next term of tenancy between the property trust company and ExxonMobil, which is likely to be long term agreement.
As Menara ExxonMobil is well-maintained, CIMB Research believes that there will be no issue for ExxonMobil to renewal the tenancy of the building.
As for Menara 3, the research firm said currently Petronas occupies about 25-stories of the 53-stories office building while other tenants include oil and gas as well as technology companies.
The research firm observed that the building which was completed in February 2011 is under a triple net lease tenancy agreement with Petronas that will expire in 2027.
Given that Menara 3 is under a triple net lease agreement, CIMB Research noted that KLCCP is not exposed to the assortment of tenants as Petronas leases the whole building and sublets it to other tenants.
Additionally, the research firm said the triple net lease tenancy agreement provides KLCCP with long-term stable rentals in the future.
On another note, CIMB Research also gathered that KLCCP is continuously looking for new assets that are suitable to be acquired and inject them into its portfolio to enhance its value.
Nevertheless, it noted new asset acquisition by KLCCP could be the company’s long term goal although there is a pipeline of acquisitions form its own development such as Lot D1, Menara Dayabumi, Lot 185 and Lot 91 which are in Kuala Lumpur that have the potential to be included in the company’s portfolio.
As property trust and real estate investment trust (REIT) provide a stable income distribution coupled by the current volatile financial market conditions, CIMB Research has maintained the valuation of KLCCP with a fair value of RM6.90.