Stock Name: MRCB
Company Name: MALAYSIAN RESOURCES CORP
Research House: INTER PACIFIC
Malaysian Resources Corporation Bhd (MRCB)
(May 19, RM1.49)
Recommend neutral at RM1.55 with target price of RM1.72: MRCB 1QFY10 revenue and net profit fell short of our full-year forecast by 18.2% and 18.1% respectively and consensus' 16.6% and 16.2% respectively.
Nonetheless with its current outstanding order book of about RM4 billion, with RM1.24 billion being external ongoing projects that are expected to be completed within two years, we believe MRCB is well in line to achieve our FY10 forecast. We recommend neutral and our target price is RM1.72 using RNAV (revised net asset value).
The improvement in its 1Q performance was mainly from: (1) engineering and construction (E&C) segment which grew by 84.2% year-on-year (y-o-y) driven by the recognition of ongoing works on Lot G, Lot 348, Lot A, Permai Hospital, Salak South transmission works; (2) infrastructure and environmental work segment which grew by 7.5% y-o-y driven by contracts revenue from Kuala Sg Pahang and Sg Kuantan rehabilitation projects; and (3) property development segment which grew by 40.6% y-o-y steered by Lot G development in KL Sentral which is a joint venture (JV) between MRCB and Aseana Properties Limited (UK).
To recap, DUKE (Duta-Ulu Klang Expressway) is an MRCB JV with Wira Kristal Sdn Bhd at an equity stake of 30%. However, the toll concession is yet to capture sufficient traffic volume to register profit. Losses for the period stand at RM2.1 million, accounting for 75% of losses registered in 1QFY10 share of results of jointly controlled entities and associates which is 159% higher compared to the corresponding quarter last year.
MRCB's current outstanding order book is at RM3.98 billion with an estimated 36% of it comprising internal construction works for KL Sentral developments (Lot A, Lot 348, Lot G etc).
In terms of order book replenishment, MRCB is still one of the main contenders for the RM7 billion LRT extension/upgrade as well as some environmental projects within the range of RM200 million-RM300 million following its expertise and track record in this segment.
We could expect positive surprises from the 10th Malaysia Plan next month regarding awards of government construction projects as well as redevelopment of government land.
Meanwhile, proceeds from its rights issue are not utilised yet. MRCB had allocated RM315 million from RM510.4 million raised from its rights issue for investment in prime land for property development. Its bank balance and deposit currently stand at RM1.16 billion.
We believe MRCB's focus will be to replenish their depleting landbank in view of the completion of KL Sentral development in about five years. We believe MRCB will be engaging its funds in larger landbank, which offers higher gross development value and development life span. ' Inter-Pacific Research, May 19
This article appeared in The Edge Financial Daily, May 20, 2010.
Company Name: MALAYSIAN RESOURCES CORP
Research House: INTER PACIFIC
Malaysian Resources Corporation Bhd (MRCB)
(May 19, RM1.49)
Recommend neutral at RM1.55 with target price of RM1.72: MRCB 1QFY10 revenue and net profit fell short of our full-year forecast by 18.2% and 18.1% respectively and consensus' 16.6% and 16.2% respectively.
Nonetheless with its current outstanding order book of about RM4 billion, with RM1.24 billion being external ongoing projects that are expected to be completed within two years, we believe MRCB is well in line to achieve our FY10 forecast. We recommend neutral and our target price is RM1.72 using RNAV (revised net asset value).
The improvement in its 1Q performance was mainly from: (1) engineering and construction (E&C) segment which grew by 84.2% year-on-year (y-o-y) driven by the recognition of ongoing works on Lot G, Lot 348, Lot A, Permai Hospital, Salak South transmission works; (2) infrastructure and environmental work segment which grew by 7.5% y-o-y driven by contracts revenue from Kuala Sg Pahang and Sg Kuantan rehabilitation projects; and (3) property development segment which grew by 40.6% y-o-y steered by Lot G development in KL Sentral which is a joint venture (JV) between MRCB and Aseana Properties Limited (UK).
To recap, DUKE (Duta-Ulu Klang Expressway) is an MRCB JV with Wira Kristal Sdn Bhd at an equity stake of 30%. However, the toll concession is yet to capture sufficient traffic volume to register profit. Losses for the period stand at RM2.1 million, accounting for 75% of losses registered in 1QFY10 share of results of jointly controlled entities and associates which is 159% higher compared to the corresponding quarter last year.
MRCB's current outstanding order book is at RM3.98 billion with an estimated 36% of it comprising internal construction works for KL Sentral developments (Lot A, Lot 348, Lot G etc).
In terms of order book replenishment, MRCB is still one of the main contenders for the RM7 billion LRT extension/upgrade as well as some environmental projects within the range of RM200 million-RM300 million following its expertise and track record in this segment.
We could expect positive surprises from the 10th Malaysia Plan next month regarding awards of government construction projects as well as redevelopment of government land.
Meanwhile, proceeds from its rights issue are not utilised yet. MRCB had allocated RM315 million from RM510.4 million raised from its rights issue for investment in prime land for property development. Its bank balance and deposit currently stand at RM1.16 billion.
We believe MRCB's focus will be to replenish their depleting landbank in view of the completion of KL Sentral development in about five years. We believe MRCB will be engaging its funds in larger landbank, which offers higher gross development value and development life span. ' Inter-Pacific Research, May 19
This article appeared in The Edge Financial Daily, May 20, 2010.
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