Stock Name: MRCB
Company Name: MALAYSIAN RESOURCES CORP
Research House: HWANGDBS
Malaysian Resources Corp Bhd (MRCB)
(April 28, RM1.55)
Maintain buy at RM1.55 with unchanged target price of RM2.25: We hosted MRCB at DBSV (DBS Vickers) Pulse of Asia Conference in Hong Kong.
Attendance was good and the feedback was positive. Besides the core key catalyst - MRCB's participation in the 3,000-acre (1,214ha) Rubber Research Institute Malaysia (RRIM) land - we believe there are other catalysts to look forward to.
There are some chunky environmental projects in the pipeline, solidifying the KL Sentral presence. We understand there could be about RM4 billion worth of environmental projects when the 10th Malaysia Plan is tabled.
This is MRCB's niche - a case in point is its current RM258 million Sg Pahang rehabilitation project, from which it could bag another RM1.4 billion in additional works. Margins for such contracts are also lucrative at 15% to 20%, double that for average infrastructure contracts, while competition in this space is limited.
Other potential contract wins amount to RM700 million, 1.8 times our financial year ending Dec 31, 2010 (FY10) order win forecast. This is for the Sg Prai environmental project, Putrajaya hospital building job and infrastructure works in Penang. It is also bidding for the light rail transit (LRT) extension worth about RM7 billion.
The company is in a position to retain some KL Sentral gems. MRCB's balance sheet was insufficient to retain investment properties when KL Sentral first started. On a stronger footing now, 40% of space at Lot 348 is due for completion in 2012, where Shell has signed a 15-year lease to take up 60% of the NLA (nett lettable area) at rentals starting from RM8.50 psf.
It is also retaining Lot E despite the offer of RM1,200 per sq ft (cap rate of 6%), which could be a new benchmark for office space in Malaysia. Shell has the option to take up the other 40% of space and also the adjacent serviced apartments to be managed by Ascott.
We do not discount potential en bloc sales after two to three rental reversion cycles. Property investment, coupled with its concessions, Duta-Ulu Kelang Expressway or DUKE and Eastern Dispersal Link or EDL in Johor Bahru, should be bigger contributors by 2013.
We maintain buy and sum-of-parts-derived (SOP) RM2.25 target price for MRCB, a high-conviction pick for the sector. - HwangDBS Vickers Research, April 28
This article appeared in The Edge Financial Daily, April 29, 2010.
Company Name: MALAYSIAN RESOURCES CORP
Research House: HWANGDBS
Malaysian Resources Corp Bhd (MRCB)
(April 28, RM1.55)
Maintain buy at RM1.55 with unchanged target price of RM2.25: We hosted MRCB at DBSV (DBS Vickers) Pulse of Asia Conference in Hong Kong.
Attendance was good and the feedback was positive. Besides the core key catalyst - MRCB's participation in the 3,000-acre (1,214ha) Rubber Research Institute Malaysia (RRIM) land - we believe there are other catalysts to look forward to.
There are some chunky environmental projects in the pipeline, solidifying the KL Sentral presence. We understand there could be about RM4 billion worth of environmental projects when the 10th Malaysia Plan is tabled.
This is MRCB's niche - a case in point is its current RM258 million Sg Pahang rehabilitation project, from which it could bag another RM1.4 billion in additional works. Margins for such contracts are also lucrative at 15% to 20%, double that for average infrastructure contracts, while competition in this space is limited.
Other potential contract wins amount to RM700 million, 1.8 times our financial year ending Dec 31, 2010 (FY10) order win forecast. This is for the Sg Prai environmental project, Putrajaya hospital building job and infrastructure works in Penang. It is also bidding for the light rail transit (LRT) extension worth about RM7 billion.
The company is in a position to retain some KL Sentral gems. MRCB's balance sheet was insufficient to retain investment properties when KL Sentral first started. On a stronger footing now, 40% of space at Lot 348 is due for completion in 2012, where Shell has signed a 15-year lease to take up 60% of the NLA (nett lettable area) at rentals starting from RM8.50 psf.
It is also retaining Lot E despite the offer of RM1,200 per sq ft (cap rate of 6%), which could be a new benchmark for office space in Malaysia. Shell has the option to take up the other 40% of space and also the adjacent serviced apartments to be managed by Ascott.
We do not discount potential en bloc sales after two to three rental reversion cycles. Property investment, coupled with its concessions, Duta-Ulu Kelang Expressway or DUKE and Eastern Dispersal Link or EDL in Johor Bahru, should be bigger contributors by 2013.
We maintain buy and sum-of-parts-derived (SOP) RM2.25 target price for MRCB, a high-conviction pick for the sector. - HwangDBS Vickers Research, April 28
This article appeared in The Edge Financial Daily, April 29, 2010.
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