- We reiterate our BUY call on MRCB with an unchanged fair value of RM2.22/share (20% discount to its NAV). MRCB announced that it has entered into a tripartite agreement with Hicom Builders Sdn Bhd (HBSB) and Dekad Kaliber Sdn Bhd (DKSB).

- DKSB will be the JV vehicle to undertake the construction of the Integrated Immigration, Customs, Quarantine and Securities Complex (ICQS) at Bukit Kayu Hitam, Kedah Darul Aman. HBSB is a whollyowned unit of conglomerate, DRB-Hicom. DKSB is to be a 51:49 pact between MRCB and HBSB.

- The new ICQC facility will be constructed on the existing Bukit Kayu Hitam ICQS complex along the northern end of the North South Expressway. Back in December 2011, the mandate to design, finance, develop and construct the new ICQS building was given to Northern Gateway Infrastructure Sdn Bhd (NGISB).

- NGISB had then on 28 May 2012, picked the Zelan-Kiara Teratai (ZKT JV) as the main contractor for the ICQS facility. The ZKT JV, in turn, has now appointed the MRCB-HBSB JV as the main contractor for the project.

- The subcontracting works are worth RM310mil and translate into an effective share of RM158mil for MRCB. The latest contract affirms MRCB’s rising order book momentum with the win of higher value-added jobs. Late last month, the group was awarded a RM485mil building contract from Destination Resorts and Hotel (DRH) in Desaru, Johor.

- We maintain our earnings forecast as the new contract (its second for the year) forms part of our fresh contract assumption for FY15F. This brings total new construction jobs for the FY-to-date to ~RM643mil.

- Moreover, MRCB’s balance sheet (FY15F net gearing: 1.4x) should improve further through the potential monetisation of more assets via injections into MRCBQuill REIT.

- MRCB’s landbanking moves are increasing. Local press reports recently included MRCB among 11 bidders for construction and refurbishment works at the National Sports Complex (NSC) in Bukit Jalil.

- The Star earlier reported that MRCB was tipped to secure the refurbishment job worth up to RM1bil in return for land within the NSC. A proposal was believed to have been submitted to the Youth and Sports Ministry.

Source: AmeSecurities Research - 9 Jul 2015