MRCB : Bukit Jalil development JV sealed BUY

STOCK FOCUS OF THE DAY

MRCB : Bukit Jalil development JV sealed                                                                             BUY

We maintain our BUY call on MRCB with an unchanged fair value of RM1.89, based on a 10% discount to its RNAV. We make no changes to our earnings forecasts, as we have imputed the potential future contribution from the proposed development in our RNAV calculation. MRCB’s 85%-owned Rukun Juang Sdn Bhd (RJSB), Tanjung Wibawa Sdn Bhd (TWSB), a wholly-owned subsidiary of the EPF, and Bukit Jalil Property Sdn Bhd (Bukit Jalil Sentral) had on 31 May 2017 entered into a subscription and shareholders’ agreement of which: 1) RJSB and TWSB will co-invest in a special purpose company, namely Bukit Jalil Sentral, to jointly developing the lands; and 2) the proposed disposal by RJSB of the lands to the JV co for an aggregated consideration of up to RM1.43bil (RM430 psf). RJSB and TWSB will subscribe for new ordinary shares and new redeemable preference shares – class A in the JV co.

We are positive on the proposed JV. It would allow MRCB to carry out the large-scale development with the support and credibility of the EPF. It will also reduce MRCB’s burden of having to finance the entire project by itself, and free up its cash to allow it to undertake other development projects it has in its stable. Furthermore, MRCB will still be able to enjoy the future profit from the development from its effective 17% stake in the JV co, and benefit from a steady income stream in the form of management contractor fees arising from the management contractor agreement.

Others :

Ikhmas Jaya : A soft patch in 1QFY17                                                                                       BUY

Mah Sing Group : Bigger emphasis on affordability                                                           BUY

Alliance Financial Group : Group CI ratio to trend upwards in near term                  HOLD

Felda Global : Hit by more impairments                                                                                 HOLD

MSM Malaysia : Sinks into the red in 1QFY17                                                                       HOLD

Sime Darby : Property in the red again                                                                                   HOLD

Oil & Gas Sector : Improved 1Q2017 report card but far from exciting                      NEUTRAL

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