AmWatch - MRCB : QCT central to more asset monetization moves BUY, 5 May 2015

STOCK FOCUS OF THE DAY

MRCB : QCT central to more asset monetization moves BUY

               

We reiterate BUY on MRCB with an unchanged fair value of RM2.30/share. This pegs the stock at a 20% discount to its estimated NAV. The Edge Malaysia highlighted over the weekend that Quill Capita Trust (QCT) will be a platform for MRCB to further its monetisation agenda. This follows the completion of its sale of Platinum Sentral to QCT last month. Recall that MRCB is to receive RM740mil for Platinum Sentral. RM476mil will be paid in cash. The balance RM274mil will be satisfied via new QCT shares which will result in MRCB ending up with a 30% stake in QCT.

More importantly, the report noted that beyond Platinum Sentral, MRCB could be keen to engage in another similar deal to monetise its matured property assets. Other property assets under MRCB’s stable that could be injected into QCT are the Shell Tower and Ascott Residences, which are reportedly worth over RM900mil cumulatively. We believe that more asset injections into QCT will free up existing debt and increase cash flow streams via dividends from the trust (to be renamed MRCB-Quill REIT).

In our initiation report on QCT on 23 April, our REIT analyst opined that QCT has been given the right of first refusal to purchase properties owned by MRCB and Quill Group. The collective value of RM1.8bil (for five assets) would see its total asset value increase by 113% to RM3.4bil. We believe QCT would be an ideal vehicle for MRCB to house its prime commercial assets within KL Sentral. QCT’s asset size has almost doubled to RM1.6bil just via the injection of Platinum Sentral. We continue to like MRCB for its transformational moves to become a property-centric group; its deleveraging efforts should be further boosted by more asset injections into QCT. We retain our estimates for now.

Others :

IJM Corporation : Interested in power assets?   BUY

Westports Holdings : 1Q15 within expectations HOLD

UMW Oil & Gas Corporation : A challenging year ahead  HOLD

MISC : Lower LNG contribution offsets stronger petroleum and offshore segment                                           HOLD

Banking Sector : Higher foreign holdings in MGS in March 2015 (1)            NEUTRAL

Banking Sector : Improved banking statistics in March 2015 (2)    NEUTRAL

QUICK TAKES

Banking Sector : Key takeaways from UOB’s analysts’ briefing (3)              NEUTRAL

Plantation Sector : Newsflow for week 27 to 30 April (1)                NEUTRAL

Plantation Sector : Key takeaways from Indofood Agri’s conference call (2)                                          NEUTRAL

NEWS HIGHLIGHTS

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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.