- We reiterate our BUY call on MRCB with an unchanged fair value of RM2.30/share. This pegs the stock at a 20% discount to its estimated NAV. The Edge Malaysia highlighted over the weekend that Quill Capita Trust (QCT) will be a platform for MRCB to further its monetisation agenda. This follows the completion of its sale of Platinum Sentral to QCT last month.

- Recall that MRCB is to receive RM740mil for Platinum Sentral. RM476mil will be paid in cash. The balance RM274mil will be satisfied via new QCT shares which will result in MRCB ending up with a 30% stake in QCT.

- More importantly, the report noted that beyond Platinum Sentral, MRCB could be keen to engage in another similar deal to monetise its matured property assets.

- The same report indicated that other property assets under MRCB’s stable that could be injected into QCT are the Shell Tower and Ascott Residences, which are reportedly worth over RM900mil cumulatively.

- We believe that more asset injections into QCT will free up existing debt and increase cash flow streams via dividends from the trust (to be renamed MRCB-Quill REIT).

- More importantly, MRCB's newsflow is picking up. Last month, MRCB confirmed that it had submitted a bid to acquire the French Embassy Land. The tender was submitted on 12 February.

- In our initiation report on QCT on 23 April (title: compelling acquisitive growth story), our REIT analyst opined that QCT has been given the right of first refusal to purchase properties owned by MRCB and Quill Group. The collective value of RM1.8bil (for five assets) would see its total asset value increase by 113% to RM3.4bil.

- As such, we believe QCT would be an ideal vehicle for MRCB to house its prime commercial assets within KL Sentral. In fact, QCT’s asset size has almost doubled to RM1.6bil just via the injection of Platinum Sentral.

- We continue to like MRCB for its transformational moves to become a property-centric group; its deleveraging efforts should be further boosted by more asset injections into QCT.

- We retain our estimates for now. With MRCB also taking up a 41% stake in Quill Capita Management (QCM), this suggests more headroom for NAV upside and deleveraging benefits.

Source: AmeSecurities Research - 5 May 2015