Results

• 4QFY14 recorded a loss of RM5.3m vs. profits of RM2.2m in 4QFY13 and RM20.1m in 3QFY14. This was largely due to RM14m share of JV losses, mainly contributed by the Nu Sentral mall, which is still at its early start up stage.

• For the full year FY14, core earnings (after stripping out gains on disposal of DUKE and acquisition of Penang Sentral at RM95m and RM7m respectively) totalled RM50.4m, a turnaround compared to losses of RM109.1m incurred in the previous year.

Deviation

• The losses in 4Q were a negative surprise to us, considering the strong core earnings rebound witnessed in 2Q and 3Q. Overall, FY14 earnings only made up 65% of our full year forecast (73% of consensus).

Dividends

• A first and final dividend of 2.5 sen was declared in 4Q (FY13: 1 sen).

Highlights

• New developments flow thru. For the property division, contribution largely came from its usual KL Sentral developments (i.e. Q Sentral and Sentral Residences). Newer developments such as 9 Seputeh and PJ Sentral also kicked in contribution, albeit at a smaller scale as construction progress is still at an early stage (i.e. 2% and 5- 10% respectively). Contribution from these 2 developments should pick up in the coming quarters as take up rates were rather decent. 9 Seputeh has thus far achieved an average take up rate of more than 40%. As for PJ Sentral, both the towers have been sold en-bloc to MyIPO and MBSB.

• Still awaiting for more jobs. With RM338m in new job wins for FY14, its orderbook now stands at RM1.2bn. This implies a decent cover of 2.4x FY14 construction revenue. Potential jobs that MRCB is eyeing on include the CIQ complex (RM300m), Klang Valley Double Track upgrade (RM480m) and Kepong incinerator (RM800m).

Risks

• Slowdown in the property market may derail MRCB’s turnaround plans as set forth by its new management.

Forecasts

• While the results were a disappointment, we keep our FY15- 16 earnings unchanged as we expect a turnaround for the Nu Sentral this year. Also, we have not factored any profits from Nu Sentral to begin with.

Rating

BUY TP: RM1.93

• MRCB remains a BUY as a turnaround play brought in by its new management team.

Valuation

• Our SOP based TP is reduced from RM1.93 to RM1.88 after we update for the latest balance sheet items.

Source: Hong Leong Investment Bank Research - 24 Feb 2015