- We maintain our BUY call on MRCB with an unchanged fair value of RM2.20/share, pegged at a 20% discount to its sum-of-parts value.

-  Stripping off an exceptional gain on disposal of its 20% stake in the DUKE highway concession (RM94.9mil), MRCB chalked up a core 2Q14 net profit of RM24mil (+97%QoQ, +3.1x YoY).

-  This took 1H14 core net profit to RM36mil from RM10mil a year ago (+222% YoY) or 38% of our full-year forecast (consensus: 54%). We however expect a further pick-up in 2H earnings, largely on account of better progress of its ongoing property projects. As expected, no dividends were declared during the quarter under review.

-  Property billings surged by 65% YoY on the back of stronger progress of the Q Sentral Office and The Sentral Residences projects at its flagship KL Sentral development.

-  Another positive was the continued improvement in its construction division – EBIT surged by 57% YoY along with a 3.6ppts rise in margins to c.8%. Notably, progress on the Ampang LRT extension works (work progress: ~29%) is gaining traction.

-  More importantly, MRCB is quickly morphing into a property-centric outfit as its restructuring efforts begin to bear fruits. MRCB’s unbilled sales currently stand at c.RM2.1bil, out of which c.RM1bil or 48% comes from QSentral and The Sentral Residences. Only larger units worth a total of ~RM190mil are left for both developments.

-  The recent launch of 9Seputeh (Old Klang Road) was favourably received. The initial launch of Parcel C – comprising two blocks of residential units and one block of SOHOs – achieved a take-up rate of 60%-70% (inclusive of bookings) with an average price of RM800psf.

-  MRCB’s net debt has come down to c.1.4x as at June 2014 from 1.7x in December 2013 following the RM228mil proceeds from the sale of DUKE highway. Apart from the commencement of tolling for the Eastern Dispersal Link (EDL) highway in Johor, we expect MRCB’s balance sheet to improve further if the proposed disposal of Platinum Sentral for RM750mil (cash portion: RM486mil) goes through.

Source: AmeSecurities