· We reiterate our BUY call on MRCB with a lower fair value of RM1.65/share (previous: RM2.22/share), as we widen the discount to its NAV (from 20% to 40%) to reflect a weaker property market sentiment. MRCB’s headline 1HFY15 results were largely in line. Ex one-off gains – i.e. disposal of Platinum Sentral 70% and sale of the Salak South land to DMIA – core earnings reached the halfway mark of our FY15F forcast.

· New property sales slowed to RM158mil in 2Q15 vs. RM677mil a year ago. Key sales drivers for quarter was 9 Seputeh, Sentral Residences and Burwood. Sales momentum could pick up in the coming quarters once MRCB starts converting some of its upcoming 2H15 launches (i.e. The Grid @ Jln. Kia Peng and Semarak City, Setapak) into SPAs.

· To-date, the The Grid has achieved a commendable booking rate of 40% since its pre-launch in March. Unbilled sales stood at RM1.7bil as at 30 June 2015.

· MRCB’s contract momentum appears intact. Just last month, the group – in partnership with Hicom Builders – was awarded the contract to build the new Immingration, Customs, Quarantine and Securities Complex (ICQS) at Bukit Kayu Hitam, Kedah. Based on its 51% stake in the JV, MRCB will have RM158mil in construction works from this new contact. Year-to-date, the group has secured ~RM643mil worth of orderbook top-ups.

· Further out, we expect MRCB to be in the running for several key infrastructure jobs to be implemented under the 11th Malaysia Plan (11MP). This includes the PDP contract for the upcoming Klang Valley LRT Line 3, for which the MRCB-George Kent JV is believed to be among three outfits shortlisted.

· That being said, we believe MRCB’s key core focus will remain with its strategic moves to be a property-centric group. To be sure, the group is reported to be among 11 bidders for construction and refurbishment works at the National Sports Complex (NSC) in Bukit Jalil in return for prime land within the vicinity.

 · There are also plans to re-develop Sooka Sentral into a specialist cardiac and vascular hub following the disposal of the five-storey commercial building to Cardiac Vascular Sentral (KL) Sdn Bhd for RM91mil.

· Likewise, any further monetisation of MRCB’s property assets via injection into MRCB-Quill REIT should further strengthen in MRCB’s balance sheet. At the moment, its FY15F net gearing stands at 1.4x. At current levels, the stock is trading at a steep 70% discount to its NAV. 

Source: AmeSecurities Research - 25 Aug 2015