Kenanga Research said MRCB is currently negotiating contracts worth RM4bil to RM5bil.
PETALING JAYA: Malaysian Resources Corp Bhd (MRCB) is favoured by analysts for its prime land and involvement in high-value infrastructure projects.
According to Kenanga Research, the company has land that is close to public transport and is undertaking high-value infrastructure projects such as the KL Sentral redevelopment.
However, the research house believes there is room for improvement in terms of project execution.
Kenanga Research maintained a “market perform” call on the stock with a target price of 56 sen.
Kenanga Research highlighted that the key takeaways from MRCB’s recent briefing for analysts, included RM637.3mil property sales in the nine months ended Sept 30 (9M24) and the company being on track to meet an internal sales target of RM800mil.
MRCB’s engineering, construction and environment division also secured the second phase of the Sungai Langat flood mitigation project in Selangor, scheduled to be completed in six years.
The research house said MRCB is currently negotiating contracts worth RM4bil to RM5bil, which include the construction of five Light Rail Transit 3 stations and related infrastructure in the Klang Valley.
The company is also involved in the redevelopment of Stadium Shah Alam, which is currently undergoing demolition, and the redevelopment of KL Sentral, which is expected to amount to RM1bil in contract value.
Currently, its order book stands at RM26bil with key projects being the Penang Airport expansion and the Pan Borneo Package (24-km stretch).
However, Kenanga Research lowered its valuations to 11 times the company’s price-earnings ratio (PER) from 15 times, due to uncertainty surrounding the re-tendering process of Mass Rapid Transit 3 (MRT3) project.
“We hold a more conservative view on the long-term prospects within the construction sector,” the research house added.
Meanwhile, CIMB Research maintained its “buy” call for the stock taking cue from the company’s outperformance in 9M24, raising its FY24, FY25, and FY26 core net profit forecasts by 19%, 3%, and 33%, respectively.
It also tweaked upwards its target price for MRCB to 96 sen from 95 sen backed by a solid balance sheet, as the company’s net gearing as of Sept 30 stood at 27%.
The research house said MRCB remained its top pick for the construction sector with a key re-rating catalyst stemming from the imminent conversion of RM4bil to RM5bil worth of large orders that are under negotiations.
It pointed out that year-to-date, MRCB’s sole contract win came from the second phase of the Sungai Langat Flood Mitigation Scheme worth RM250mil.
“The group’s active tender book currently stands at RM3bil, but excludes the MRT 3 project as the tender validity for the performance bonds lapsed in March 2024,” CIMB Research added.
It said the key upcoming bids are the Penang International Airport expansion; the Tok Bali Water Treatment Plant in Kelantan; and a 15km stretch of the Central Spine Road in Kuala Krai, Kelantan.
Other upcoming bids include three large scale solar plants in Chuping Valley Industrial Park (100MW), Gurun Ayer Puteh (100MW) and Bestari Jaya (15MW); and the Tawau Airport upgrading works.
