Highlights

MIDF Sector Research

Author: sectoranalyst   |   Latest post: Tue, 7 Jan 2020, 10:50 AM

 

Malaysian Resources Corporation Berhad - Updated Timeline to Allay Concerns on Prolonged Delay

Author:   |    Publish date:


INVESTMENT HIGHLIGHTS

  • LRT3 works will start in 2HFY19
  • The update is timely to allay concerns on the delay
  • Forward earnings supported by strength in orderbook
  • Reiterate BUY call with an unchanged TP of RM0.83

According to a news source, MRCB was quoted as saying the works for LRT3 will hit its restart button in 2HFY19. We recall that its recent progress has tapered off, due to the re-negotiation on costs, designs and job scopes. This was after the government approved its continuation in July 2018, albeit at a reduced cost. Notably, a price tag of RM11.9b (after -47% reduction) was arrived for civil works coupled with RM4.8b set aside mainly for land acquisition.

According to management, contributions from LRT3 will begin to kick-in in 2HFY19. We understand that the group had to defer expected contribution from last year, given the recent delay of the project. We opine it firms up our earlier belief, in which contribution from LRT3 will likely to be dismal in the immediate term.

Works of LRT3 will continue in 2HFY19. To recall, the JV Co contributed about RM20.7m in PAT for 9MFY18. While it was evident that contribution was higher in comparison to the previous year at RM7.2m, we ought to highlight that the amount recorded was significantly lower than management’s expectation due to deferment of progress billings. Despite that works will only continue in 2HFY19, we should note that the latest project update is rather timely to allay the concerns of over its prolonged delay.

Current business prospect. Its long-term transformation programme has been successful, with notable achievements from 1) the sale of EDL highway to the government; and 2) stake divestment in Bukit Jalil Sentral development to EPF. The impact from these transactions is farreaching, enabling the group to move forward with stronger balance sheet. The strength is further coupled with 1) low gearing of approximately 20% (in 2018); 2) growing land bank; and 3) robust orderbook of ~RM20b to provide strong long-term earnings base.

Impact to earnings. We maintain our assumptions, given our revision on FY19 earnings recently.

Recommendation. We reiterate our BUY call with TP of RM0.83, based on our SOP-driven valuation. Downside risks to our calls are 1) slower than expected progress works; and 2) lower than expected property sales.

Source: MIDF Research - 15 Feb 2019

Share this
Labels: MRCB

Related Stocks

Chart Stock Name Last Change Volume 
MRCB 0.405 0.00 (0.00%) 11,641,400 

  Be the first to like this.
 


FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
View Trading Signals and run Live Backtest
MQ Affiliate
Earn rewards with MQ Affiliate Program
 
 

508  404  597  777 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 KANGER-WB 0.01+0.005 
 KANGER 0.05-0.005 
 BRAHIMS 0.24-0.22 
 JADI 0.12-0.005 
 SERBADK 0.38-0.005 
 HIBISCS 0.945+0.03 
 HSI-CIG 0.12+0.02 
 CEKD 0.955+0.105 
 ARMADA 0.535+0.015 
 KNM 0.2250.00 
PARTNERS & BROKERS