The Three Numbers That Define KLCC Property Holdings Bhd

Nothing quite defines Malaysia better than the PETRONAS Twin Towers.

The iconic twin structure used to be owned by KLCC Property before it was transferred to stapled trust KLCC Property Holdings Bhd (KLSE: KLCC.KL; 5235.KL) that also owns  KLCC REIT. Apart from the star asset, the property company also  owns a number of other outstanding structures in the capital’s city centre. They include premier shopping mall Suria KLCC and the 5-star hotel Mandarin Oriental.

KLCC Property delivered a decent return of 9.9% on shareholder equity last year. It was only a tad below the market average of 10.7%. It also means that the company generated MYR9.90 on every 100 ringgit invested by shareholders.

The property developer’s good Return on Equity (RoE) can be traced to its high Net Income Margin of 103.6%. The extraordinary margin can in turn be traced to adjustment to the fair value of its property. Without the correction the bottom-line margin would have been more modest.

In common with most property companies, KLCC Property is not especially efficient with its use of assets. After all, property companies can have a lot of money tied up in expensive bricks and mortar. KLCC’s Asset Turnover is a below-average 0.08. It implies that it only generated MYR8 of revenue on every 100 ringgit of assets.

Surprisingly, KLCC does not have much debt for a property company. It had MYR17.6 billion of Total Assets and MYR3 billion of Total Liabilities. That equates to a Leverage Ratio of only 1.21.

By dismantling the Return on Equity for KLCC, it is easy to see the attributes that define the company. Its RoE of 9.9% is the product of an exceptional Net Income Margin of 103.6%; a lowly Asset Turnover of 0.08 and a modicum of Leverage of 1.2.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.