KUALA LUMPUR: Shares of Malaysian Resources Corporation Bhd
(MRCB) had on Thursday surged past CIMB Equities Research's target price as investors were upbeat about the prospects and that the KL Sports City (KLSC) project in Bukit Jalil was 98% completed.
At 11.55am, MRCB was up eight sen to RM1.51 with 22.38 million shares done.
It had earlier risen to a high of RM1.54, the highest since May 23. CIMB Research's target price was RM1.42.
The FBM KLCI fell 1.1 points or 0.06% to 1,767.06. Turnover was 696.34 million shares valued at RM523.39mil. There were 299 gainers, 371 losers and 364 counters unchanged.
The research house said MRCB hosted a site visit to the KLSC project in Bukit Jalil recently, which will be the venue for the upcoming SEA Games and Asean Para Games. Over 30 analysts and fund managers attended.
KLSC is largely a refurbishment/rejuvenation contract undertaken by MRCB via a land-swap deal. KLSC will host the upcoming 29th South East Asian (SEA) Games in Aug 19-30 and Asean Para Games (Sept 17-23).
CIMB Research said it was pleasantly surprised by the scale of transformation to comply with international standards, with most of the scope of work revolved around the 20-year-old Bukit Jalil National Stadium.
Phase 1, which comprises five major components, is 98% completed with a total cost of RM1.2bn.
Other components are the Axiata Arena (Putra Indoor Stadium), National Hockey Stadium and National Aquatic Centre. 22 consultants, 28 subcontractors and 1,800 workers were roped in for the project.
“Construction, which started 15 months ago, will be fully completed by end July, two months ahead of schedule. This is despite major changes to selected work scopes and compliance to international standards such as International Organization of Standardization (ISO), FIFA, and the International Swimming Federation (FINA). The handover of other refurbished buildings is to be completed by the end of this month,” it said.
CIMB Research said according to the master plan, once the other new components in phase 2 (mall, hotel and sports training facility) are completed in 2021, KLSC will shape up to be a transit-oriented development (TOD) given its direct access and close proximity to the Bukit Jalil LRT station.
Under phase 1, the covered walkway linking the Bukit Jalil LRT station to the stadium will be about 8-10 metre wide while the plaza area from the LRT station features a profiled slope and terraces.
The 76.1-acre exchange land (three parcels, located near KLSC) in return for the KLSC project will be fully transferred to a new JV company, Bukit Jalil Sentral, by end-2017.
The Employees Provident Fund (EPF) will hold an 80% stake while MRCB, through 85%- owned Rukun Juang, will hold an effective 17% stake. Bukit Jalil Sentral will undertake a 20-year mixed development project with an estimated GDV of RM20bil.
Earnings impact from this venture is likely from FY19F at the earliest, in our view. Positive on KLSC’s progress; Hold maintained
“Overall, the tour of the refurbished KLSC was an eye opener. We are thrilled that the rejuvenated facility is on track to welcome the much anticipated SEA Games. We retain our FY17-19 EPS forecasts, target price (30% RNAV discount) and Hold call.
“An upside risk to our call is if the Bandar Malaysia MOU materialises, with a major transport hub project for MRCB. Delays in potential contract wins and the long overdue sale of the Eastern Dispersal Link (EDL) highway in Johor are likely downside risks,” it said.
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