Period

1Q15

Actual vs. Expectations

1Q15 core net profit for its continuing operations of RM14.5m is within our expectation but below market, accounting for 23% and 15% of the respective full-year estimates.

Dividends

No dividend was declared as expected.

Key Results Highlights

YoY, net profit for its continuing operations saw a huge jump by 37x to RM234.5m, mainly due to the one-off disposal gains from Platinum Sentral amounting to RM220m. Core net profit for its continuing operations also increased, by 136% to RM14.5m underpinned by revenue growth of 98%. Revenue growth was backed by better contributions from most of its divisions, i.e. construction, property and infrastructure. Its major on-going projects comprise LRT extension, Sentral Residence and Q Sentral. That aside, contribution from its associates also saw major improvements by 760% to RM5.8m.

QoQ, it recorded core net profit of RM14.5m visà- vis core losses of RM13.5m in 4Q14, despite lower revenue of RM404m (-17%). The improvement in earnings was driven by firmer EBIT margin by 4ppt to 19% mainly from its construction (+1ppt), property (+5ppt, excluding asset disposal gain) and building services (+12ppt) divisions.

Outlook

Moving forward, MRCB is still planning to launch at least c.RM1.0b worth of development projects in the immediate term, consisting “affordable” range of residentials in Kajang (GDV: RM234m), high-end residences near KLCC namely The Grid (GDV: RM387m), office buildings in Putrajaya (GDV: RM336m).

It has a remaining external construction orderbook of c.RM1.1b, coupled with c.RM1.7b unbilled property sales providing the group at least two years of earnings visibility.

Change to Forecasts

No changes to FY15-16E earnings.

Rating

Maintain UNDERPERFORM

Valuation

We are comfortable with our current SoP valuation, which implies a TP of RM1.27 (refer overleaf for more details) as MRCB is still highly geared in a challenging property environment. Hence, we are maintaining our UNDERPERFORM call at this juncture.

Risks to Our Call

Strong take-ups for launchings.

Faster-than-expected orderbook replenishments.

Source: Kenanga Research - 22 May 2015