Period  3Q14/9M14

Actual vs. Expectations For 9M14, MRCB registered core earnings (continuing operations) of RM55.1m which came in better than expected, making up 111% and 92% of our and streets’ full-year estimates, respectively. The better-than-expected results were mainly due to a higher-than-expected revenue contribution from its property division whereby progressive billings for its PJ Sentral project finally kicked in.

Dividends  No dividend was declared, as expected.

Key Results Highlights YoY, 9M14 core earnings increased to RM55.1m from a loss of RM56.0m previously, underpinned by a strong revenue growth of 69%. Its major driver property development division registered a revenue

growth of 116% driven by better progressive billings from several projects like Q Sentral, Sentral Residences, MyIPO Tower and MBSB Tower.

 QoQ, 3Q14 core earnings improved by 13% to RM26.0m on the back of revenue growth of 53%, due to the similar reasons mentioned above. Notably, its engineering and construction operating profit also seen tremendous growth of 215% to RM29.0m as operating margin improved by 12ppt to 16% given the better progress on its on-going construction projects.

Outlook  We believe that MRCB is on the right track; growing its property division with a niche in integrated transport hub development and the development of PJ Sentral and Penang Sentral, propelling the group forward as one of the niche developers in town.

Change to Forecasts We raised our FY14-15E core earnings higher by 76%-46% to RM87.1m and RM119.1m, respectively as we have factored in higher property revenue contribution from its PJ Sentral project namely MyIPO and MBSB Towers.

Rating Maintain OUTPERFORM

Valuation  We continue to maintain our long-term OP call on MRCB with an unchanged SoP-driven TP of RM2.48 (refer overleaf for more details) as its longterm prospects in property development remain intact with the development of Kwasa Land (Project MX-1) and also on the construction front as they are bidding for an incinerator project worth

approximately RM800.0m. To recap, MRCB also made an announcement along with its 9M14 results that they had bagged a construction job from Desaru Peace Holdings Villas Sdn Bhd worth RM141.0m for the construction works of a resort in Kota Tinggi, which is well within our orderbook replenishment assumptions of RM1.0b.

Risks to Our Call Delays in construction projects.

 Lower-than-expected orderbook replenishments.

Source: Kenanga