• We maintain our BUY call on MRCB with an unchanged fair value of RM1.89, based on a 10% discount to its RNAV. We make no changes to our earnings forecasts, as we expect the contribution from the potential development on the land to be acquired to only be realised in the next few years.

• MRCB’s 51%-owned subsidiary Metro Spectacular Sdn Bhd has entered into a sale and purchase agreement with the mayor of Kuala Lumpur for the acquisition of three parcels of land measuring approximately 40,720.5 sqm in total, all situated in Kuala Lumpur, for a total cash consideration of RM335.5mil. The acquisition will be financed via a combination of internally generated funds and/or external borrowings.

• The land is located within the locality of Jalan Putra, Kuala Lumpur, approximately 4km to the north of Kuala Lumpur city centre. It is bound by main access roads, such as Jalan Putra, Jalan Tun Ismail, Jalan Tun Razak, and Jalan Kuching, with access from multiple directions.

• We are positive on the proposed acquisition. It would increase MRCB’s landbank, allowing it to sustain its property development business moving forward. We are encouraged by the strategic location of the land which lies within a short distance from the city centre, with connectivity to public transport infrastructure. We believe the land has a high prospect of being developed into successful development, given the scarcity of prime land in Kuala Lumpur for sizeable commercial development.

• The acquisition is expected to be completed by 4Q17. We are not concerned by the potential increase in gearing due to the loan amount of the group as we believe the gearing level of MRCB is currently at a very manageable level, which should be further improved by its upcoming rights issue.

Source: AmInvest Research - 16 Jun 2017