• Adani JV marks a good foray into India

• Drawing similar strengths but different expertise

• Earnings remains intact for

• Maintain BUY with an unchanged TP of RM2.10

Earnings intact for the next 3 years. MRCB’s recent joint-venture (JV) with Adani Realty could spur its prospect growth by looking out for higher margin projects and sharing its expertise in developing transitoriented development (TOD) projects in India.

Drawing similar strengths but different expertise. Projects developed by Adani Realty such as the upcoming Inspire BKC and Inspire Hub are both located in prime areas of Mumbai with access to public transport i.e. rail – drawing similar strength to MRCB albeit Adani’s lesser experience. Other property developers in India of similar stature such as Lodha Group and Oberoi Realty have similar project profiles in which MRCB could consider to impart its experience in TOD development. We prefer MRCB to partner directly with Mumbai Suburban Railways to pass on its expertise. This would open up immediate access to developers with land or development close to the prime locations of Andheri, Bandhra and Mahalaxmi alongside the Western railway line in Mumbai.

Earnings pickup for MRCB if project value >USD600m. Reliance Group partnered with Samsung C&T to build Dhirubhai Ambani International Convention and Exhibition Centre’s amounting to USD680m. The project is slated to be completed in Q4FY17. Assuming the JV is 51%-49% basis on the back of 9.0% profit margin, Samsung would stand to benefit USD29.9m (49.0%) to its bottom line. While we can only illustrate a comparable; it is expected that the JV for projects between MRCB and Adani would be formed on the same basis. We reckon that significant impact on earning will only be meaningful to MRCB’s should the project clinched is more than USD600m and profit margin assumption estimated between 11.0% to 15.5%.

Recommendation. Given the prospect of TOD projects in Malaysia and India, MRCB’s shares is still attractive at 19.8x forward earnings despite trading above its average 3-year PER of 10.57. We maintain our BUY call with an adjusted SOP based TP of RM2.10 per share, suggesting the shares have another +15.2% upside.

Source: MIDF Research - 6 Apr 2017