Pension fund raises stake in KLCC Property (5089)

Although KLCC Property has yet to provide further details on the REIT venture, analysts remained positive on the idea.


KUALA LUMPUR: The Employees Provident Fund (EPF) has been increasing its exposure in KLCC Property Holdings Bhd this month, where the pension fund has spent over RM10 million to buy more than two million shares in the property investment company.

While the net acquisition may not be significant, it may be a sign that EPF likes KLCC Property's idea on exploring the possibility of a real estate investment (REIT) structure as a move to further unlock value gains in the property market.

In a HwangDBS Vickers Research report, it explored two possible scenarios for a REIT structure (a pure retail REIT and a mixed REIT) where asset sale proceeds could touch RM4.8 billion and RM13.6 billion, respectively, based on cap rates of six per cent for retail, six to seven per cent for offices and eight per cents for hotels.

"While the timing remains uncertain, this is a positive step to help unlock value and allow non-corporate shareholders to benefit from REIT distribution's lower tax rates.

"We do not discount the possibility of the RCULS (redeemable convertible unsecured loan stocks) overhang being addressed as well.

"Petronas can convert RM714 million RCULS anytime as they are in the money (RM1.98 conversion price, 2014 mandatory conversion), raising its stake in KLCC Property to 66 per cent from 51 per cent," said the report.

+1 any fair value indicated?