- We maintain our BUY call on MRCB with a higher fair value of RM2.30/share (previous: RM2.20/share), as we roll-forward our valuation base to FY15F.

- Excluding one-off items, MRCB recorded a core net profit of RM50mil – a marked improvement from the RM115mil core net loss it recorded a year ago. We attribute the vastly improved performance to two key reasons:-

(i) A significant turnaround in the construction division which had previously been dragged down by losses in some of its previous FYs (FY14 EBIT of RM43mil vs. RM79mil loss in FY13). Outstanding orderbook is ~RM1.2bil.

(ii) Growing contributions from the property division (property billings rose 90% YoY to RM876mil on higher progress billings from ongoing projects, e.g. Q Sentral and The Sentral Residences).

- 4Q14 core earnings however shrank 78% QoQ due to higher interest and start-up losses for the NuSentral Mall, which opened its doors last March. However, we expect the mall to do better in FY15F, as tenancy levels have reached 95%.

- On the other hand, MRCB’s de-leveraging efforts are beginning to bear fruits; net gearing had improved to 1.5x as at 31 December 2014 from 1.7x a year ago. The group’s cash position is set to improve further once it completes the disposal of Platinum Sentral to Quill Capita Trust for RM740mil by end-1Q15.

- With a core focus on transport-oriented developments (TOD), MRCB is emerging as a property-centric group. More importantly, it has amassed close to 616 acres of undeveloped landbank with a combined GDV of ~RM30bil. The group has also made its maiden foray overseas with the Burwood development in Melbourne (GDV: RM182mil).

- Upcoming launches for FY15F include:- (i) balance of phases for 9 Seputeh; (ii) Penang Sentral; (iii) The Grid@Kia Peng; (iv) Kajang Utama 3 Residences; and (v) Putrajaya Office Towers.

- We project core net profit to double in FY15 (RM101mil) on the back of maiden full-year contributions from the EDL concession and PJ Sentral Phase 1.

- More upside is to come from further construction/development opportunities via PJ Sentral 2 and Lots 1& 2 in Section 26, PJ.

Source: AmeSecurities