Results

FY13 reported core losses of RM75.9m (-5.1 sen/share), which exceeded ours and consensus losses estimates by 161% and 236% respectively.

Deviation

Mainly due to weaker margins for its construction and property division.

Dividends

Net dividend of 1 sen/share declared which is lower than our dividend estimates of 1.6 sen/share. Payment date to be determined during AGM.

Highlights

Results review… In line with the seasonal strength, 4Q revenue grew by 25% YoY and >100% QoQ to RM379.2m, driven mainly by stronger billings for its construction division. However, due to lower margins for both its construction and property division, 4Q core PATAMI was only a paltry sum of RM2.2m. Overall, due to the huge kitchen sinking exercise in 3QFY13, MRCB posted core losses of RM75.9m (5.1 sen/share) for FY13.

Construction… Still waiting for the official award of KVDT upgrading works worth RM800m (60% stake) which management believes could materialise in 2QFY14. New contract prospect for CIQ complex in Padang Besar worth RM300m. Overall, MRCB has an outstanding construction order book of RM885.8m, translating to 2.1x FY13’s construction revenue.

Property… Limited new launches in FY14 as it intends to review existing landbank. Will participate in Kwasaland RFP. Overall, MRCB has an effective unbilled property sales of RM738.3m, translating to 1.6x FY13’s property revenue.

EDL soon?... Decision on whether to proceed tolling or privatise the EDL highway will be made in May-14.

Risks

Execution risk; Regulatory and political risk; Rising raw material prices; and Unexpected downturn in the construction and property cycle.

Forecasts

Unchanged.

Rating

BUY

We remain optimistic that the new management will be able to turnaround MRCB’s operations and positive on the degearing exercise. Hence, we maintain our long term BUY call.

Positives: (1) Success in acquiring PJ Sentral land; (2) New construction contract wins; (3) Acquiring strategic land banks

Negatives: (1) Concerns over projects execution and property take-up rates; (3) Delays by the Government on EDL; (4) High net gearing levels; (5) Short-term earnings dilution arising from share swap with Nusa Gapurna.

Valuation

TP maintained at RM2.02 based on SOP valuation (see Figure #5).

Source: Hong Leong Investment Bank Research - 26 Feb 2014