EPS forecasts are intact as we have not imputed post-takeover enhancements to the numbers. We continue to apply a 20% discount to RNAV. There could be a near-term share price overhang triggered by this news, but it could be offset by large-scale job wins, conclusion to the EDL divestment, and positive resolution to the Nusa Gapurna deal in 2H13. Maintain Outperform. 

The Edge Weekly reported over the weekend that the Selangor State Development Corp. (PKNS), which holds 30% of PJ Sentral (Nusa Gapurna owns the rest), wants out of the MRCB-Nusa Gapurna deal. According to the newspaper, Selangor chief minister Tan Sri Khalid Ibrahim does not think PKNS is getting as good a deal as Nusa Gapurna, and wants to exercise the option to buy back the 70% stake. 

We are negatively surprised by the state government's position on the deal. This is because the pricing was based on independent valuations (market values) for the targeted land banks under Nusa Gapurna, which are at an attractive 44-157% premium to NBV. This should have ensured PKNS's participation. But there now appears to be timing risks as the PJ Sentral portion of the acquisition could face challenges. We do not, as yet, see this development as a potential deal breaker. But deal completion could take longer than the 4Q13 time frame if the state government stays firm on its stand. We understand that MRCB's proposed acquisition of the 70% stake in PJ Sentral is interconditional on PKNS's acceptance of the offer. 

Stay invested. The EGM to approve MRCB's RM729m proposal to acquire Nusa Gapurna and its related companies will be held on 20 Jun 13. Despite the likely timing risks and challenges from the Selangor state government, we believe there is still a fair chance for a resolution to the deal. Other potential positives in 2H13 are sizeable rail job wins and divestment of the Eastern Dispersal Link (EDL) to the government. Near-term stock overhang is likely.

Source: CIMB Daybreak - 17 June 2013, Full PDF Report