- We maintain our BUY call on MRCB with an unchanged fair value of RM2.20/share – a 20% discount to its RNAV. MRCB announced that it has reached a settlement agreement with Perbadanan Kemajuan Negeri Selangor (PKNS) to resolve all disputes between both parties regarding the PJ Sentral development.

- At the same time, both parties have also entered into agreements:- (i) MRCB is to acquire the balance 30% stake in P.J Sentral held by PKNS for ~RM85mil under a share sale agreement; and (ii) MRCB will then assign PKNS with development rights for Tower 2 of PJ Sentral valued at RM91mil.

- PKNS will be accorded rights to construct/develop Tower 2 (NFA: ~ (NFA: ~862k), save for the parking bays below which will remain the property of PJ Sentral. In return, MRCB will receive net proceeds of ~RM6mil arising from these two deals.

- More importantly, the verdict will finally pave the way for MRCB to acquire a 70% stake in PJ Sentral Development Bhd (PJSD) from Nusa Gapurna. We expect this to be consummated within a month, followed by the full consolidation of PJ Sentral by 4Q14 once it receives the approval of MRCB’s shareholders at an EGM.

- This latest development represents a significant step forward for MRCB to finally realise the embedded value of PJ Sentral. PJSD is developing Phase 1 of its flagship PJ Sentral Garden City – a 40-acre integrated development that has high development potential (plot ratio: 6x on a net basis).

- Phase 1 (GDV: ~RM3bil) comprises:- (i) five tower blocks along with a hotel collectively held on Lot 12; and (ii) the Puncak Wangi land (Lot 8). It is strategically located at the heart of PJ city, and is bounded by matured neighbourhoods.

- Prior to this, two towers have been pre-sold to MyIPO and MBSB for RM250mil and RM239mil respectively, at record capital values of ~RM850psf each. On the other hand, Lot 8 will be occupied by Celcom-Axiata.

- A positive resolution to the PJ Sentral dispute could pave the way for the future injection of another 28 acres under Phase 2 into the MRCB stable (GDV of ~RM7bil).

- MRCB also announced that it has bought out the remaining 40% stake in Excellent Bonanza (~RM17mil) for full control of the Nu Towers at KL Sentral. We maintain our BUY call for now and maintain our fair value pending a further update with management. 

Source: AmeSecurities