MRCB: Pending Flag Pattern Breakout

Pipeline to start materialising. MRCB’s pipeline should start materialising in 2024. Notably, the LRT3 Phase 2 and the redevelopment endeavours for both the Shah Alam Stadium and KL Sentral hold promise to bolster the group's existing active orderbook valued at RM5.1bn. Among these ventures, the reinstatement of scopes for LRT3 Phase 2 stands out as the most immediate opportunity. With a targeted operational timeline set for 2QCY27, formalizing the expanded scope appears imminent, potentially resulting in a contract win exceeding RM1.5bn.

Meanwhile, the redevelopment of Shah Alam Stadium, valued at over RM1bn, will unfold in multiple phases to facilitate land monetization. The initial phase, slated for demolition, is scheduled to commence in 2024, with completion expected by mid-2025 at a cost of RM35.5m. Following this phase, higher-value segments are poised to kick off, likely by the second half of CY25. Additionally, MRCB's appointment as the contractor for KL Sentral's rejuvenation, driven by long-standing overcapacity issues, is anticipated to see formalization around mid-CY24. This initiative includes granting MRCB development rights over the airspace of KL Sentral. On previous guidance, the project could add >RM1bn to its orderbook.

Apart from the mentioned projects, MRCB has existing tenders for flood mitigation packages – award decision could be soon. We gather that the company has also submitted tenders for PBH Sabah 1B packages while MRT3 tenders remain pending. The company is also a beneficiary of Penang LRT through its Penang Sentral development, anticipated to be a main transportation hub for the project.

How far can it go? MRCB's current P/B ratio of 0.6x suggests that it remains attractive, especially if the anticipated developments come to fruition. Notably, during previous upcycles, MRCB traded within a range of 0.7x to 1.2x. This historical trend indicates that there could be more upside for the stock's valuation if market conditions align with the expected developments.

Pending flag pattern breakout. MRCB is pending for a flag pattern breakout. A successful breakout above RM0.69 will signal a resumption of an uptrend, potentially spur the price toward RM0.69-0.72-0.78 levels. Cut loss at RM0.54.

Collection range: RM0.56-0.58-0.60

Upside targets: RM0.69-0.72-0.78

Cut loss: RM0.54

Source: Hong Leong Investment Bank Research - 22 Feb 2024