News The media speculated that the government is
looking to acquire MRCB’s EDL (Eastern Dispersal Link) highway for RM1.2b. The
amount is expected to be more than enough to cover EDL’s bond amount of RM1.04b.
However, there are no official announcements yet from either the government or MRCB.
Comments The price tag is largely below our
expectations as it is not enough to cover MRCB’s equity portion at c. RM270m
for the project after paying off its RM1.04 debts. We think that the price tag
is unattractive for MRCB.
Based on our numbers, we value the EDL
concession at RM1.8b with the equity value at RM750m. In our estimate, w have
factored in the assumptions of a 10% toll rate hike for every 3 years in the
34-year concession period with an ADT (Average Daily Traffic) of 50,000. We see
lower risk for lower-thanexpected traffic for EDL, as it serves the main dispersal
route from the CIQ Complex.
In our opinion, the reasonable offer for the
EDL will be in the range of RM1.4b to RM1.8b based on our forecast after
factoring the minimum return on equity at 20% and incremental toll rate
charges.
To recap, the government’s immediate solution
for MRCB will be enough to cover EDL’s interest and operational cost until the
end of 2012.
The RM1.2b price tag is enough to cover its
debt and but short of its equity by RM100m. Nonetheless, it is still positive
for MRCB as it will lift up its earnings by RM84m a year.
Outlook Remains
bright due to it being the frontrunner for the RRI land development project and
potential new significant contracts to be secured ahead (the construction order
book replenishment for FY12 to date has been unexpectedly slow).
Forecast No
changes to our forecasts.
Rating Maintain OUTPERFORM
We are maintaining our OUTPERFORM recommendation.
Valuation No changes in our Target Price of RM2.07 based
on SoP valuation.
Risks Delays
in securing more land banks and cost overruns for its ongoing projects due to
construction delays.
Source: Kenanga
No comments:
Post a Comment