The STAR News on 19 June 2012:

MRCB revenue loss to be compensated

MALAYSIAN Resources Corp Bhd (MRCB) said that the Government has agreed to make good on toll revenues foregone of MRCB's newly-completed wholly-owned Eastern Dispersal Link (EDL) in Johor, of which tolling did not commence on May 1 as scheduled.

To be paid from May 1, the amount will be calculated based on the actual traffic number (that is at about 60,000 to 61,000 vehicles per day at present), multiplied by the agreed toll rate (reported to be at RM6.20 for one-way).

[The Math: That is close to RM 12 million per month of compensation!)

This will be the temporary solution to the tolling issue of EDL (we understand that there is sufficient allocation to cover payments at least until December), pending a final decision by the Government.

The final decision could be, among others:

● The Government is to eventually give EDL the green light to carry out tolling in accordance with the terms of the concession agreement (at the agreed toll rate, and the agreed point of collection, namely the Custom and Immigration Complex in Johor Bahru); or

● The Government is to take over the toll road (but this raises the next question, namely pricing).

MRCB believes that the long awaited Rubber Research Institute (RRI) land redevelopment project may finally get off the ground in the second half of this year with the formal land acquisition by Kwasa Land, wholly-owned special purpose vehicle of the Employee's Provident Fund by this month, followed by the call for tender for infrastructure works and the parceling out of development land plots.

The group is eyeing many bites on the same cherry comprising contractor for Phase 1 infrastructure works worth about RM1bil; project manager for the entire development; and developer for land parcels.

MRCB's near-term earnings visibility is good on the back of strong construction and property profits. Construction profits will be underpinned by successful variation order claims that are likely to be reflected in the coming quarterly results and at least RM1bil worth of new construction jobs that are “within reach” this year.

The new jobs may come from, among others, its share of works from the RM1bil extension project for Duta-Ulu Kelang (DUKE) Expressway (MRCB owns a 30% stake in DUKE Expressway, with partner Ekovest holding the 70% controlling interest).

MRCB also spoke about the possibility of securing a sizeable Government job. The RM1bil new construction orderbook expectations actually exclude potential Klang Valley My Rapid Transit work packages.

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Million thanks.