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Wednesday, February 24, 2016

AmInvestment sees 2016 as watershed year for MRCB

KUALA LUMPUR: AmInvestment sees 2016 as a watershed year for Malaysian Resources Corp Bhd (MRCB) as it forges ahead with its restructuring efforts.

"We foresee more asset monetisation moves ahead, following the recent disposals of Menara Shell (RM650mil) and Sooka Sentral (RM91mil),” it said on Tuesday

AmInvestment said MRCB's transformation into a Bumiputera-controlled PLC will open up more construction/landbanking opportunities and expedite its NAV expansion. The proposed Bumiputera private placement is to conclude by end-2Q16.

Last year, MRCB secured a record of more than RM5bil worth of construction jobs and another RM607mil worth of fee based contracts. The latter will help nurture a re-profiling of MRCB’s orderbook via higher-value fee-income.

“Moreover, we expect MRCB to be at the forefront of several large-scale infrastructure projects under the 11th Malaysia Plan.

“This will include the upcoming MRT 2, Pan Borneo Expressway and more works under the Sg. Pahang river project. The imminent signing of the PDP contract for LRT 3 is another positive,” it said.

AmInvestment is retaining its Buy call on MRCB with a lower fair value of RM2 a share from RM2.05 a share.

This pegs the stock at a lower discount rate of 30% (from 35%) to reflect increasing prospects for MRCB to unlock its latent value and continued orderbook momentum.

Overall, MRCB’s FY15 results were below expectations. Core net profit was only RM1mil versus RM17mil in FY14.

The main drag came from (i) slower progress billings for key construction jobs; (ii) delays in property launches; and (iii) RM15mil upfront cost for the Sungai Pahang river project ahead of RM500mil worth of additional works under Phases 4-5 (letter of intent received).

“But, we expect sequential earnings to improve from 2H16 as work progress for 9 Seputeh and PJ Sentral improve along with maiden contributions from the LRT 3 project.

AmInvestment said new property sales fell to RM597mil in FY15 vs RM1.1bil in FY14.

However, it expected sales momentum should pick-up again this year via the crystallisation of bookings from The Grid @ Kia Ping (over 80% booking + sales to-date).

“New launches for the year include new phases for 9 Seputeh as well as affordable homes in Kajang and Bandar Seri Iskandar, Perak.

“MRCB’s key appeal is as a turnaround story; more value could be unlocked from its property and construction units. The former is well underway via the recycling of MRCB’s prime commercial assets into MQ REIT. To be sure, its net gearing has improved from 153% in FY14 to 127% in FY15 (FY13: 173%),” it said.

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