PETALING JAYA: Malaysian Resources Corp Bhd’s (MRCB) prospects look bright with a slew of projects likely to come its way.
It was reported that MRCB has formed a consortium with Berjaya Land Bhd’s subsidiary Berjaya Rail, IJM Corp Bhd’s unit IJM Construction and national railway company Keretapi Tanah Melayu (KTMB) to submit a concept proposal for the Kuala Lumpur-Singapore high-speed rail (HSR) project.
RHB Research said MRCB is still a “buy” with a higher target price of 74 sen from 52 sen previously.
“We believe such an arrangement for a consortium is apt for the concept proposal under the project’s request for information (RFI) exercise. MRCB has rail credentials (Mass Rapid Transit or MRT 2 and Light Rail Transit or LRT 3) in addition to its role in redeveloping KL Sentral (subject to negotiations with the government), which seems timely with the HSR’s potential rollout,” the research house said.
It added that while there are various types of permutations could still take place before a final structure is decided.
“A similar structure to that seen in 2018 (whereby HSR packages were divided into the northern and southern sections) cannot be ruled out,” RHB Research said.
Apart from the HSR catalyst, the research house pointed out that MRCB’s pre-qualified status for a flood mitigation project (estimated at RM500mil to RM1bil) in Selangor could see further developments by the first half of the year, given the urgency to manage floods in the country.
“Other prospects may come from MRT3 – we think MRCB has a chance to secure the elevated section, while the reinstatement of five LRT3 stations may also benefit the group, which is the main contractor for the ongoing construction of the 20 initial stations,” the research house said.
RHB Research has maintained its earnings estimates, ascribing a higher target price earnings multiple of 18 times from 11 times for MRCB’s construction arm, reflecting the level that MRCB was trading at during the mid-2017 construction upcycle.
“Taking into consideration the bright prospects mentioned above, we also lowered our discount to revised net asset value to 40% from 55%.
“While we project a 13% year-on-year earnings drop in financial year 2023, MRCB has an estimated three-year earnings compound annual growth rate of 15% supported by its strong order book-to-revenue cover ratio of plus 10 times and a land bank of 1,153 acres (RM33bil gross development value),” it added.