KEY INVESTMENT HIGHLIGHTS

• Earnings met expectation

• Construction segment has shown a notable improvement

• The property division generated RM236.4m revenue in 1QFY20

• No changes to our earnings estimates

• Reiterate BUY with an unchanged TP of RM0.73

Earnings met expectation. MRCB’s 1QFY20 topline came in at RM425.8m (+82.9yoy) underpinned by the Property Development & Investment Division, which recorded a 178% increase in revenue - mainly on account of the commencement of revenue recognition from the Group’s property development project in Melbourne, 1060 Carnegie upon the handover and settlement of purchased units following the completion of construction. As for the bottom line, the Group reported strong earnings of RM15.6m from RM4.1m in the year before. The core earnings met ours but exceeded consensus’ expectations, accounting for 24.6% and 34.5% of respective full year FY20 earnings estimates.

Construction segment has shown a notable improvement. This segment booked RM174.8m revenue in 1QFY20, jumped by +31.7%yoy from RM132.7m in 1QFY19. The better performance was fueled by (1) the Damansara-Shah Alam Elevated Highway Package CB2, (2) EPF Headquarters at Kwasa Sentral, (3) Sungai Besi-Ulu Kelang Elevated Expressway Package CA2, (4) Mass Rapid Transit Line 2 Package V210, and (5) construction works of the property development projects.

The property division generated RM236.4m revenue in 1QFY20.

The key contributors for the revenue was the commencement of revenue recognition from the Group’s property development project in Melbourne, 1060 Carnegie upon the handover and settlement of purchased units following its completion in December 2019. On top of that, other factors that lifted the segment’s topline was the sale of completed unsold inventory and on-going development projects, namely (1) Sentral Suites in KL Sentral, (2) the 9 Seputeh mixed residential development in Jalan Klang Lama, and (3) the office towers in PJ Sentral Garden City.

Earnings estimates. We make no changes to our FY20 and FY21 earnings estimates as the results met expectation.

Source: MIDF Research - 29 Jun 2020