• FY16 Results above expectations

• Insipid results due to heavy expenses and completed projects

• Earnings estimates intact from sturdy orderbook of RM5.4bn

• Nonetheless, we reaffirm our BUY recommendation with a TP of RM2.08

1QFY16 Results below expectations. MRCB’s FY16 PATAMI of RM266.0m (-19.5% YoY) came in above our expectations accounting for 229% and 289% of ours and consensus’ estimates respectively. Notably, its revenue surged from RM1.6bn in FY15 to RM2.4bn in FY16 (+42.0% YoY)

Positive results due to project recognition. Several projects such as KL Sports City and MRT Package V210 from Persiaran APEC to Putrajaya Sentral amounting to RM648m have progressed. Consequently, as we have reasoned in 1QFY16 report (1.06.2017), higher project recognition is reflected in Q4FY16 hence recouping its shortfall in previous quarters and exceeding estimates.

Strong orderbook level. Sturdy unbilled outstanding orderbook of RM5.4bn provides ample earnings visibility up to 2027. Its construction orderbook comprises of projects such as Kwasa Damansara, Giant Kajang and PR1M Brickfields and MRT2.

Adamant on earnings estimates. We are steadfast on the prospect on MRCB’s earnings estimates moving forward for FYE17 due to its ability to recover from a bad earnings cycle and clinched other transportoriented development (TOD) projects. MRCB is working all out to unlock its balance sheet to ease working capital evidentially from the sale of Menara Shell for RM640m and a leasehold land held by Onesentral Park Sdn. Bhd for RM180m last year. Furthermore, its property division’s total sales amounted to RM1.2bn which is a commendable effort despite the property mart’s grim outlook. We reckon upcoming quarters will be positive reflective of potential higher project recognition.

Recommendation. We maintain our BUY call with an adjusted SOP based TP of RM2.08. Our TP reflects the DCF of toll concession, updated RNAV of on-going property development projects; book value of investment properties and earnings multiples over recurring businesses

Source: MIDF Research - 28 Feb 2017