- It was reported in the media today that Malaysian
Resources Corporation (MRCB) could be awarded the final KV MRT viaduct package
which has a value of RM1bil, sometime this week.
- The contract entails the construction of viaduct gateways
and other associated works between the Taman Mesra and Kajang Stations.
- MRCB’s order book is expected to grow to about RM3.5bil
(effectively about RM2.5bil) should this goes through. We would not be making
any changes as we have already assumed RM1bil order book renewal for this year.
Nonetheless, margins are expected to be thin given the intense bidding.
- Including this award, we estimate that some 38 work
packages worth a combined RM17bil would have been dished out. We believe there
are another 16 packages currently being evaluated while the remaining 31 have
yet to be called.
- On the flipside, tenders for the beautification portion of
the ROL project worth up to RM1bil could be called in 2H2012. MRCB’s JV with
Ekovest has the upper-hand, we believe, given their expertise. Nonetheless, any
potential involvement in the development of selected pockets of land along the
river will not be in the immediate term.
- Its property development unit’s focus should remain at KL
Sentral with more than five ongoing projects. The group nonetheless is looking
at starting work on other landbank, for e.g. in Setapak, although redevelopment
of Brickfields’ government squatters will be pushed to next year.
- MRCB is currently trading at a steep 36% discount to our
estimated SOP value. While valuation is demanding at 27x for FY13F earnings,
newsflow on the award of MRT package would support the stock. Maintain our HOLD rating.
Source: AmeSecurities
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