MRCB has been awarded an RM323m SUKE highway contract package CA2 from Turnpike Synergy Sdn Bhd. The scope of works includes the construction of mainline and other associated works from CH.2400 to CH.4200. The work is expected to commence on 4 February 2019 and completed within a period of 14 months. MRCB’s orderbook now stands at c.RM5.1bn which translates to a healthy cover of 2.9x on FY17 construction revenue. Maintain forecast as this job win is within our FY19 job replenishment of RM500m. Maintain HOLD rating with unchanged SOP-driven TP of RM0.65. Our TP is pegged to a 20% discount to SOP value (RM0.81). FY18-20 implied PE of our TP are 67.9x, 38.0x and 30.8x respectively.

NEWSBREAK

SUKE construction contract. MRCB has been awarded an RM323m SUKE highway contract package CA2 from Turnpike Synergy Sdn Bhd. The scope of works includes the construction of mainline and other associated works from CH.2400 to CH.4200. The work is expected to commence on 4 February 2019 and completed within a period of 14 months.

HLIB’s VIEW

First construction job win. This is the first construction job win for the company. MRCB’s orderbook now stands at c.RM5.1bn which translates to a healthy cover of 2.9x on FY17 construction revenue.

Cautious on job flow outlook. While this contract win is positive, we remain cautious on the overall macro job flow outlook. We expect smallish basic infrastructure projects such as road upgrading, hospital, water, sewerage and rural area development projects will be the top priority for government infrastructure spending now which we believe is insufficient to spark any enthusiasm back towards the sector.

Forecast. Maintained as this job win is within our FY19 job replenishment of RM500m.

Maintain HOLD, TP: RM0.65. Maintain HOLD rating with unchanged SOP-driven TP of RM0.65. Our TP is pegged to a 20% discount to SOP value (RM0.81). FY18-20 implied PE of our TP are 67.9x, 38.0x and 30.8x respectively.

Source: Hong Leong Investment Bank Research - 29 Jan 2019