Investment Highlights

• We upgrade MRCB to BUY from HOLD with a revised FV of RM0.84 from RM0.83 per share, based on SOP valuation (Exhibit 1). We revised our FY19 and FY20 earnings upwards by 4.5% and 3.9% to reflect revenue recognition of the newly-awarded SUKE project.

• MRCB announced that it has been awarded a project for the construction and completion of mainline and other associated works from CH.2400 to CH.4200 for the Sungai Besi-Ulu Kelang Elevated Expressway (SUKE) privatisation package CA2.

• The project is worth RM323mil with the completion date of 3 April 2020, 14 months from the date of site possession on 4 Feb 2019.

• We are positive on this announcement as this project is expected to contribute positively to the earnings of MRCB for the financial years 2019 and 2020. Hence we revised our FY19 and FY20 earnings forecasts by 4.5% and 3.9% to RM152.9mil and RM170.3mil respectively.

• To recap, the government had in October 2018 agreed for the LRT3 project to continue at a total cost of RM16.6bil under a fixed price contract regime. With the addition of this new RM323mil SUKE project, a robust outstanding construction order book of RM4.8bil, a strong property unbilled sales of RM1.62bil and EDL compensation that have now been resolved, we believe the outlook for MRCB remains stable in short to mid-term.

• We raised our FV to RM0.84 (Exhibit 1) from RM0.83 based on SOP valuation; implying forward PERs of 23.6x and 21.2x for FY19–20 respectively.

• As the stock offers a potential upside of 20%, we upgrade MRCB to BUY.

Source: AmInvest Research - 29 Jan 2019