News

Yesterday, MRCB announced that they have secured a contract award worth RM485m from Destination Resorts and HoteL (DRH) for the construction of a conference centre and hotel at Desaru Coast.

Comments

The contract award amounting to RM485m is MRCB’s first construction orderbook replenishment for 2015, and the construction of the conference centre and hotel would take up to 21 months.

However, this would be the second construction job from Desaru as MRCB previously has bagged a similar job in Desaru from Desaru Peace Holdings Villas Sdn Bhd worth RM141m back in Nov-14.

This particular contract award will boost its current outstanding orderbook to RM1.5b from RM1.1b previously. However, we are neutral on the contract award of RM485m, as it is within our FY15 orderbook replenishment assumption of RM1.0b.

Outlook

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

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

Forecast

No changes to FY15-16E earnings, as the contract award is within our FY15 orderbook replenishment assumption of RM1.0b.

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

Stronger-than-expected property sales.

Lower-than-expected sales and administrative costs.

Source: Kenanga Research - 25 Jun 2015