PETALING JAYA: Malaysian Resources Corp Bhd’s (MRCB) strong second quarter financial performance and tender bids are leading analysts to revise their outlook for the company.
Kenanga Research raised its financial year 2024 (FY24) earnings forecast for MRCB by 36% after it posted a core net profit of RM54.2mil for the first half of FY24 (1H24), which came in at 88% of Kenanga’s full-year forecast.
“The variance came largely from better-than-expected construction margins, thanks to more aggressive progress billing for the Light Rail Transit Line 3 (LRT 3) project in Selangor and third phase of the Pahang River flood mitigation projects,” the research house said.
Revenue however slid 37% year-on-year in 1H24 on lower contributions from its engineering, construction and environment arm on lower billings.
MRCB’s property-development segment reported losses.
However, the company achieved RM497.4mil in property sales in 1H24 and was on track to meet its internal sales target of RM800mil, while its unbilled sales stood at a low of RM558.7mil.
MRCB is attracting the interest of analysts because the company is in the running to replenish its order book by at least RM4bil. Its current tender book stands at RM34bil.
CIMB Securities Research said the company is pursuing several cornerstone projects worth RM4bil to RM5bil that are in the advanced stages of negotiations.
It won a RM250mil contract for the second phase of the Langat River flood mitigation work in the second quarter and is expecting a final decision to be made on the LRT 3 variation orders that include the five reinstated stations by October.
“We expect the Shah Alam Sports Complex redevelopment project – potentially worth over RM1bil – to be finalised soon as demolition work on the existing Shah Alam Stadium is already well underway,” CIMB Securities Research said.
RHB Research highlighted that MRCB’s manageable net gearing of 0.27 times at the end of 1H24 may enable it to gear up for tender wins for anticipated infrastructure projects.
MRCB’s active construction order book as of end 1H24 stood at RM15.7bil, providing earnings visibility of three years.
“We view the group hitting the FY24 new-job target of RM5bil backed by its RM34bil tender book, which comprises possible work on the Pan Borneo Highway, Penang Airport expansion and a flood mitigation project in Selangor, among others,” the research house said.
RHB Research, which has a “buy” rating on MRCB, increased the company FY24-FY26 forecast earnings by 94%, 63% and 60%, respectively, after adjusting for higher margins and progress billings for construction jobs along with dialling down on the effective tax rate which was too conservative previously.
“In particular, we raise FY25 earnings for the construction arm to RM55mil from RM30mil. Hence, we arrive at a new sum-of-parts derived target price of 86 sen, from 80 sen earlier,” it noted.
