Malaysian Resources Corp Bhd
(Nov 20, RM1.49)
Maintain buy with fair value of RM2.20: MRCB announced on Bursa Malaysia on the evening of Nov 19 that it had secured a RM141 million contract from Desaru Peace Holdings Villas Sdn Bhd in Kota Tinggi, Johor.
The contract is for the duration of 87 weeks with date of site possession within three weeks from the date of acceptance. The scope of works is for: (i) the construction and completion of central facilities, conference centre, spa, car park, meeting and events rooms, back of house facilities and related supporting facilities (excluding structural works); (ii) 46 units of Club Suites (excluding structural works); (iii) two units of prototype villas (excluding structural works); and (iv) a beach club, a recreational club, remote back of house and overall infrastructure works.
The award represents the second construction win for MRCB in financial year 2014 ending December (FY14) after it secured another building job in Johor worth RM197 million last month.
This takes the value of MRCB’s new jobs win for the current year-to-date to about RM338 million. We make no changes to our earnings forecast as the new contract already forms part of our new order book assumptions MRCB’s prospects are perking up as its restructuring efforts start to bear fruit. With momentum on its side, we understand that MRCB’s active tender book consists of several jobs in excess of RM100 million each.
To be sure, the group has reportedly pre-qualified to bid for the RM800 million Kepong waste-to-energy incinerator project.
We envisage more net asset value (NAV) upside moving into FY15F via the following: (i) future development profits from PJ Sentral and Kwasa Damansara; (ii) potential monetisation of its prime commercial assets at KL Sentral, starting with Platinum Sentral; (iii) Penang Sentral (piling has commenced); and (iv) selective construction bids.
We maintain our “buy” call on MRCB with an unchanged fair value of RM2.20 per share, a 20% discount to its revised sum-of-parts value. — AmResearch, Nov 20
This article first appeared in The Edge Financial Daily, on November 21, 2014.