- We maintain our BUY call on MRCB with an unchanged fair value of RM2.20/share. This pegs the stock at a 20% discount to its RNAV. The Edge Malaysia reported that MRCB is looking to unlock the value of some of its properties, and in the process, create the single largest office REIT in Malaysia with assets worth RM5bil.

- Recall that MRCB had last week signed a conditional sale and purchase agreement to dispose Platinum Sentral to Quill Capita Trust (QCT) for RM750mil.

- MRCB will emerge with an effective 31% stake in QCT following the deal. It had also proposed to purchase a 41% stake in Quill Capita Management (QCM), the management company for QCT. The entire transaction is set to be concluded by 3Q 2014.

- As per The Edge Malaysia report, management indicated that it is looking to inject RM1bil worth of properties annually into the REIT over the next five to six years.

- After Platinum Sentral, next in the pipeline could be Menara Shell and Ascott Residences, collectively worth over RM2bil. This is in line with our earlier views.

- In addition, it could also be targeting assets owned by government-linked entities such as its major shareholder EPF and Lembaga Tabung Haji.

- Likewise, the Quill Group of Companies is believed to be making moves to inject four properties worth RM2.5bil into the REIT in the near term.

- At the moment, Platinum Sentral has an indicative yield of just over 6%, while QCT’s existing 10 properties have a blended yield of over 7%. Just based on dividend income, MRCB is expected to receive RM14mil (~12% of FY15F net profit). We maintain our forecast for now.

- More importantly, the latest plan reaffirms our conviction that MRCB’s asset monetisation moves are gaining traction. To be sure, MRCB is seeking approval from the authorities to redesignate the stock as a property counter from construction currently.

- With a niche focus as an urban developer – especially with integrated transport systems – we expect MRCB to be in the mix for the mammoth KWASA Damansara project. The group is one of 20 developers that will be submitting a request for proposal under Phase 1. The outcome could be known by May.

Source: AmeSecurities