KUALA LUMPUR (Feb 1): RHB Research maintains a ‘buy’ call on Malaysian Resources Corp Bhd (MRCB) with a target price (TP) of 45 sen, following indications that the construction of the new Shah Alam Sports Complex is on track to begin between February and April.  

In a research note on Wednesday (Feb 1), RHB made no changes in its earnings forecasts pending details on the land to be swapped in exchange for MRCB’s works on the complex and the job value to redevelop the complex. 

“Initially, the cost was estimated to be RM787 million — circa 10% of its unbilled orderbook excluding the long-term Bukit Jalil Sentral job,” said its research analyst Adam Mohamed Rahim. 

“All in, our SOP-derived TP remains at 45 sen after ascribing a 0% ESG (environment, social and governance) premium to MRC’s intrinsic value, based on our in-house proprietary scoring methodology.” 

This comes after the Selangor state government and MRCB gathered feedback from the public prior to finalising the stadium’s design — which includes a smaller capacity of 35,000 to 45,000 from 180,000 previously. 

“Despite the smaller capacity, we believe this would result in better utilisation, as the redevelopment plans include recreational, commercial and residential parts (ie a sports-themed mall, hotel) together with a transit hub linked to the Light Rail Transit 3 (LRT3) station,” said Adam. 

“The new stadium features an ethylene tetrafluoroethylene (ETFE) ceramic coating for its roof and cool air circulation under seats which promotes thermal stability. There would also be a retractable football pitch facilitating easier transformation from sports to multi-purpose mode for other events.” 

In addition, the underground water storage system (UWSS) adds value to the project as the area is prone to floods. 

“This UWSS feature was likely mooted back in 2015, when former Shah Alam mayor Datuk Ahmad Zaharin mentioned utilising a portion of the Shah Alam stadium grounds to stop flash foods from occurring.

“The Shah Alam City Council, in April 2022, had allocated RM150 million to upgrade drainage systems and retention ponds in the city over three years,” he said.

Adam favours MRCB for its diversified property arms into industrial properties and new overseas markets in Australia and New Zealand. 

“An upcoming catalyst would be the potential reinstatement of omitted works for LRT3 worth circa RM1 billion — partly mitigating risks from the Mass Rapid Transit 3 project,” said Adam. 

“Valuations are undemanding as the stock is trading -1.5 standard deviation from its five-year mean P/E (price-to-earnings ratio).” 

MRCB shares closed at 33 sen on Jan 31, translating into a market capitalisation of RM1.474 billion.