- We maintain our BUY recommendation on MRCB with an unchanged fair value of RM2.20/share. This pegs the stock at a 20% discount to its RNAV.

- The Business Times reported that the Penang Sentral project is set to take off, with construction works to begin by 4Q14 over a three-year period. The entire project is due to be completed by 2020.

- Penang Sentral is a 49:51 JV between MRCB and Pelaburan Hartanah Bhd (PHB). First launched in 2007, Penang Sentral was mooted as an integrated mixed-used commercial development with a transport hub.

- The 9.7.ha (~24 acres) development will serve as a vital transportation hub for the northern region of Peninsula Malaysia. The transport hub would include terminals for ferries, busses, taxis, trains and a monorail station.

- Hence, we draw comfort that the Penang Sentral is finally taking shape after over six years of delays.

- Its footprint has been redesigned to fast track the construction of the terminal besides making it more practical for public usage.

- More importantly, The Business Times article added that both the Federal and Penang governments are committed to the Penang Sentral project, which is reportedly worth ~RM2bil.

- The transport terminals would be built first before other project components are developed. Our channel checks indicate that Phase 1 could consist of a transportation hub, retail mall & hotel.

- We are positive on Penang Sentral’s development appeal. Given its prior experience in transforming KL Sentral into a model transport hub, we believe that MRCB is able to replicate its success and create value for its future developments.

- Overall, this latest news further galvanises our deepening view that MRCB’s solid restructuring progress is fast-gaining traction.

- We value Penang Sentral at RM119mil (~2% of its estimated RNAV). More value could emerge as land values surrounding Butterworth could rise when the Penang undersea tunnel link, connecting Georgetown with Butterworth, takes off. 

Source: AmeSecurities