AmWatch - MRCB : Delivering on its restructuring promises BUY, 19 Nov 2014

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MRCB : Delivering on its restructuring promises BUY

We maintain BUY on MRCB with a marginally lower fair value of RM2.20/share – based on an unchanged 20% discount to its revised SOP value. The slight tweak of its fair value takes into account a higher share base following the completion of MRCB’s acquisition of PJ Sentral Development Sdn Bhd.

MRCB reported 9MFY14 earnings of RM49mil, a huge improvement from RM111mil losses in 9MFY13. Property earnings returned to the black at RM114mil, thanks to ongoing billings from QL Sentral and the Sentral Residences as well as maiden contributions from 9 Seputeh. Likewise, construction earnings shrugged off the legacy losses of last year to post a profit of RM44mil on an EBIT margin of c.14%.   

MRCB appeared to have delivered on most of its restructuring milestones it set forth earlier this year. The full consolidation of PJ Sentral’s development potential is now possible following MRCB’s buyout of the balance 30% stake in Sept. During the same month, MRCB finalised the disposal of MRCB Technologies for RM8mil. Earlier in June, MRCB completed the disposal of its 30% stake in DUKE highway for RM228mil.

Despite lowering our earnings base for FY14F – largely on timing differences for its property launches and construction prospects – our revised FY14F core net profit forecast of RM61mil still represents a huge improvement from the RM109mil net loss the group recorded in FY13. As its restructuring moves are intact, net gearing improved to ~1.4x as at 30 June 2014 (FY13: 1.7x). Its 9 Seputeh development will likely benefit from its plans to construct a RM115mil overhead bridge linking Old Klang Road to the NPE.

We envisage more NAV upside moving into FY15F via the following:- (i) future development profits from PJ Sentral & Kwasa Damansara; (ii) potential monetisation of its prime commercial assets at KL Sentral, starting with Platinum Sentral; (iii) Penang Sentral; and (iv) selective construction bids.

Others :

Benalec : Submits DEIA for Tg. Piai            BUY

Sunway : 9MFY14: Strong margins            BUY

TSH Resources : Flat output QoQ in 3QFY14          HOLD

Dialog Group : Expect stronger earnings in subsequent quarters                HOLD

Hartalega Holdings : 2QFY15: Further margin compression            HOLD

CIMB Group : Earnings slippage in 3Q      HOLD

QUICK TAKES

Carlsberg Brewery : Exceeds 10% RPT threshold                HOLD

MBM Resources : Absence of pre-Raya rush, festive holidays drag 3Q14                HOLD

NEWS HIGHLIGHTS

Malayan Banking : Eyes RM1b remittances

Media Sector : RM1bil deal to provide digital terrestrial television in Malaysia

Automotive Sector : New vehicle sales ease 2pc

Construction Sector : KL-Singapore HSR talks still ongoing, says SPAD

DISCLAIMER:

The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.