HLIB Research 27 September 2011 (KLCC Property; Traders Brief)

Stock Name: KLCCP
Company Name: KLCC PROPERTY HOLDINGS BHD

Research House: HLG

Price Call: HOLD

Target Price: 3.46

KLCC Property (HOLD)

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Refinancing its debt

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'''' KLCC's 50.5% owned subsidiary, Midciti Resources Sdn Bhd has agreed to fully repay its bonds outstanding to parent company PETRONAS, at a premium of RM35.31m.

'''' The bonds in question are the RM199m secured Bai Al-Dayn Bonds and the RM600m 13-year bond, due in Nov 2011 and Nov 2012 respectively.'' They will be refinanced from the proposed issuance RM880m Sukuk.

'''' Impact is uncertain, as the interest rate for the new RM880m, 10-year sukuk have yet to be announced.

'''' However, we do note that interest costs for the refinanced bonds were RM67m, or 47% of last year's total financing costs.

'''' Maintain HOLD on KLCC, given lack of upside catalysts and unresolved RCULS conversion issue. Target price maintained at RM3.46.

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FBM KLCI: Taking cues from overseas

'''' On the monthly chart, the KLCI remains vulnerable to further downward correction towards 1259 (lower Bollinger band) and 1200 (50% FR) in the medium to long term. Immediate supports are 1310 (26 Sep pivot low), 1300 and 1293 (38.2% FR).

'''' Without a firm recovery in euro-zone solution, any market bounce-ups from an oversold position will likely be short-lived. Based on the daily charts, resistance levels are 1363 (lower Bollinger band), 1383 (5-d SMA) and 1409 (10-d SMA).

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Crude oil: Supports: US$70-75; Resistance: US$90-95

'''' If prices can breach the mid Bollinger band of US$85, we expect more upside targets to US$88 (50-d SMA) and US$90 (downtrend line resistance). Beyond that, it is likely to face tremendous hurdles at US$92.6 (upper Bollinger band) and US$95.4 (200-d SMA).

'''' On the other hand, deteriorating economic outlook and failure to tackle the euro-zone debt crisis in the near term will dampen sentiment and trigger another round of selldown towards US$75-79 territory. A global recession may see prices sliding further towards US$65-74 levels (weekly chart)