KUALA LUMPUR (May 4): Minority shareholders of Malaysian Resources Corp Bhd (MRCB) have been advised to vote in favour of a management contract between its 70%-owned unit Kwasa Sentral Sdn Bhd and MRCB Land Sdn Bhd, a wholly-owned subsidiary of MRCB, to jointly develop the town centre of the Kwasa Damansara township on 64.3 acres of land in Sungai Buloh, Selangor (proposed MX-1 construction) for RM7.46 billion.

Independent adviser Kenanga Investment Bank Bhd (Kenanga IB) said the proposed MX-1 construction is fair and reasonable and is not detrimental to MRCB shareholders.

"We note that MRCB possesses the requisite experience and expertise to undertake the proposed MX-I construction given that the engineering, construction and environment segment is one of the group's major core businesses," Kenanga IB said in an independent advice letter to minority shareholders today.

"The proposed MX-I construction, with potential revenue of RM7.46 billion over the development period represents an opportunity for the group to further strengthen its core business in the engineering, construction and environment segment.

"The development forms part of the Kwasa Damansara township project being undertaken by Kwasa Land Sdn Bhd, which is being developed on 2,330 acres of land strategically located in the vicinity of the mature surrounding suburbia of Petaling Jaya. Kwasa Land estimates that the Kwasa Damansara township will be able to generate a gross development value (GDV) of RM50 billion over the next 20 years," it noted.

The adviser also highlighted that as the management contractor of the proposed MX-1 construction, MRCB is able to showcase its engineering and construction expertise in large-scale mixed development and construction projects, enabling the group to gain a stronger foothold in the construction and development of Kwasa Damansara township, and strengthen its position as a player in the industry.

"The proposed MX-1 construction could also potentially lead to future opportunities and projects in the Kwasa Damansara township that can potentially contribute positively to the future earnings of the group in the mid to longer term period," said Kenanga IB.

Separately, MRCB minority shareholders have also been advised by independent adviser Public Investment Bank Bhd to vote in favour of the proposed joint venture (JV) between MRCB's 85%-owned unit Rukun Juang Sdn Bhd and Tanjung Wibawa Sdn Bhd, a wholly-owned subsidiary of the Employees Provident Fund (EPF), to jointly develop three parcels of leasehold land in Bukit Jalil here into a mixed development with a GDV of  RM21 billion.

Public Investment Bank deemed the proposals fair and reasonable and not detrimental to MRCB shareholders.

"The proposed JV will allow MRCB Group to expand its property development projects to its current land bank of 393 acres with an estimated total GDV of RM57.3 billion. The MRCB group would be able to collaborate with EPF to undertake the development, which would generate GDV of RM11.99 million based on the feasibility report, which would contribute to the future earnings of MRCB Group.

"The proposed JV will also allow the group to add another large scale project to its existing property development projects," the adviser added.

Public Investment Bank also sees the proposed construction contributing positively to MRCB Group's future earnings as it will provide the group with a steady income flow via the provisional total project sum of RM11.01 billion over the development period of 20 years.

"After taking into consideration the prospects of the Malaysian economy, the Malaysian property market, the Malaysian construction sector, the lands and MRCB Group, we are of the view that the proposals are favourable to the group," it added.

MRCB shares closed unchanged at RM1 today, with 4.78 million shares traded, bringing a market capitalisation of RM4.39 billion.