AmWatch - MRCB : Shifting into the next growth phase BUY, 24 Feb 2015

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MRCB : Shifting into the next growth phase         BUY

We maintain BUY on MRCB with a higher fair value of RM2.30/share (previous: RM2.20/share), as we roll-forward our valuation base to FY15F. Excluding one-off items, MRCB recorded a core net profit of RM50mil – a marked improvement from the RM115mil core net loss it recorded a year ago. We attribute the vastly improved performance to two key reasons:- (i) A significant turnaround in the construction division which had previously been dragged down by losses in some of its previous FYs. Outstanding orderbook is ~RM1.2bil; and (ii) growing contributions from the property division.

4Q14 core earnings however shrank 78% QoQ due to higher interest and start-up losses for the NuSentral Mall, which opened its doors last March. However, we expect the mall to do better in FY15F. MRCB’s de-leveraging efforts are beginning to bear fruits; net gearing had improved to 1.5x as at 31 December 2014 from 1.7x a year ago. The group’s cash position is set to improve further once it completes the disposal of Platinum Sentral to Quill Capita Trust for RM740mil by end-1Q15. MRCB has amassed close to 616 acres of undeveloped landbank with a combined GDV of ~RM30bil. The group has also made its maiden foray overseas with the Burwood development in Melbourne (GDV: RM182mil).

Upcoming launches for FY15F include:- (i) balance of phases for 9 Seputeh; (ii) Penang Sentral; (iii) The Grid@Kia Peng; (iv) Kajang Utama 3 Residences; and (v) Putrajaya Office Towers.  We project core net profit to double in FY15 (RM101mil) on the back of maiden full-year contributions from the EDL concession and PJ Sentral Phase 1. More upside is to come from further construction/development opportunities via PJ Sentral 2 and Lots 1& 2 in Section 26, PJ.

Others :

MISC : Petronas LNG carriers injected into the group      HOLD

QUICK TAKE

Eastern & Oriental : Strong take-up rate for The Tamarind project             BUY

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