Stock Name: MRCB
Company Name: MALAYSIAN RESOURCES CORP
Research House: HWANGDBS
KUALA LUMPUR: Hwang DBS Vickers Research has raised its target price for MALAYSIAN RESOURCES CORP [] Bhd (MRCB) to RM2.25 adding that the Employees Provident Fund may be forced to make a higher offer if it is serious in bringing its stake to 50%.
It said on Monday, April 5 that it believes the Prime Minister's recent statement on the Government and the EPF forming a JV for the 3,400 acres of Rubber Research Institute Malaysia (RRIM) Land where MRCB will likely be the master developer has thwarted EPF's GO at RM1.50/share.
"We read EPF's market moves (buying shares post ex-rights, subscribing heavily for extra rights shares and bringing its stake to 41.5% post GO) as it being serious in seeing this conditional take over materialize and it solidifying its shareholding prior to a material announcement.
"At a higher offer of RM1.80/share, the additional 8.5% to raise its stake to 50% will cost MRCB RM209m. With financial obligations to its contributors, we assume EPF sees further deep embedded value in MRCB," it said.
Hwang DBS Vickers Research also provided a scenario analysis on it clinching different land deals which are all mutually exclusive.
In all scenarios, it assumed there is 50:50 sharing with EPF. The most accretive deal, in its view, is the 3,400 RRIM land in Sungei Buloh given its sheer size, potential pricing power and also expectations of a LRT station.
In Scenario 4 (RRIM), the research house assumes MRCB clinches just one-sixth of the development portion with a 50% stake, a plot ratio of just 3x and ASP of RM300 psf will translate into a total GDV of RM17bn and raise our SOP value by 50% to RM2.70/share.
"We estimate break even at RM243 psf based on land cost of RM10 psf and CONSTRUCTION [] costs of RM180 psf. Another likely deal, is the additional 20-30 acres of land in KL Sentral," it said
"We raise our PT to RM2.25/share assuming a 50% probability from Scenario 4 which has yet to take into account any fee income or construction work from its master developer status. Even if a higher offer doesn't materialise, MRCB is transforming into a credible GLC-linked contractor/developer with strong earnings support - 3-year EPS CAGR of 40% anchored by higher progress billings at KL Sentral and external orderbook of RM1.5bn. Reiterate BUY," it said.
Company Name: MALAYSIAN RESOURCES CORP
Research House: HWANGDBS
KUALA LUMPUR: Hwang DBS Vickers Research has raised its target price for MALAYSIAN RESOURCES CORP [] Bhd (MRCB) to RM2.25 adding that the Employees Provident Fund may be forced to make a higher offer if it is serious in bringing its stake to 50%.
It said on Monday, April 5 that it believes the Prime Minister's recent statement on the Government and the EPF forming a JV for the 3,400 acres of Rubber Research Institute Malaysia (RRIM) Land where MRCB will likely be the master developer has thwarted EPF's GO at RM1.50/share.
"We read EPF's market moves (buying shares post ex-rights, subscribing heavily for extra rights shares and bringing its stake to 41.5% post GO) as it being serious in seeing this conditional take over materialize and it solidifying its shareholding prior to a material announcement.
"At a higher offer of RM1.80/share, the additional 8.5% to raise its stake to 50% will cost MRCB RM209m. With financial obligations to its contributors, we assume EPF sees further deep embedded value in MRCB," it said.
Hwang DBS Vickers Research also provided a scenario analysis on it clinching different land deals which are all mutually exclusive.
In all scenarios, it assumed there is 50:50 sharing with EPF. The most accretive deal, in its view, is the 3,400 RRIM land in Sungei Buloh given its sheer size, potential pricing power and also expectations of a LRT station.
In Scenario 4 (RRIM), the research house assumes MRCB clinches just one-sixth of the development portion with a 50% stake, a plot ratio of just 3x and ASP of RM300 psf will translate into a total GDV of RM17bn and raise our SOP value by 50% to RM2.70/share.
"We estimate break even at RM243 psf based on land cost of RM10 psf and CONSTRUCTION [] costs of RM180 psf. Another likely deal, is the additional 20-30 acres of land in KL Sentral," it said
"We raise our PT to RM2.25/share assuming a 50% probability from Scenario 4 which has yet to take into account any fee income or construction work from its master developer status. Even if a higher offer doesn't materialise, MRCB is transforming into a credible GLC-linked contractor/developer with strong earnings support - 3-year EPS CAGR of 40% anchored by higher progress billings at KL Sentral and external orderbook of RM1.5bn. Reiterate BUY," it said.
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