Analysts positive on MRCB’s first contracts of the year
KUALA LUMPUR: Malaysian Resources Corporation Bhd’s (MRCB) two new contracts has been viewed positively as the projects willo beef up its construction order book, keeping it occupied for the next two and a half years.
In filings to Bursa Malaysia, MRCB said it was awarded the DASH package CB2 worth RM369 million from Turnpike Synergy Sdn Bhd, and a RN40 million contract from Tenaga Nasional Bhd (TNB).
AmInvestment Bank Bhd’s research arm (AmInvestment Bank) was positive on the new contracts as these will beef up MRCB’s construction order book, which stood at RM7 billion at end-1QFY17.
“The contracts should keep MRCB’s construction division occupied for the next 2.5 years,” it said.
Meanwhile, the research team at Kenanga Investment Bank Bhd (Kenanga Research) pegged a neutral view on the wins.
“We are neutral on the award given that MRCB’s year to date (YTD) wins of RM409 million is still within our FY17E replenishment target of RM1 billion; making up 40 per cent of our replenishment target with a remainder of RM0.6 billion to be achieved for the rest of year.
“Assuming profit before tax (PBT) margins of seven per cent, these newly secured projects are expected to contribute circa RM9.9 million to MRCB’s bottomline per annum.”
On the group’s outlook, Kenanga Research noted that for the financial year 2017 (FY17), MRCB targeted sales of RM1.2 billion, banking on their planned launches of Sentral Suites (RM1.4 billion in GDV), 9 Seputeh Phase 2 (more than RM900 million in GDV), Bukit Rahman Putra (RM100 million GDV) and Bandar Sri Iskandar (RM16 million GDV).
“MRCB’s remaining external construction order-book stands at circa RM7.4 billion. Coupled with circa RM1.5 billion unbilled property sales, these numbers will provide the group with at least four years of earnings visibility,” it said.
Despite its neutral view on MRCB’s latest projects, Kenanga Research upgraded its call on the stock to ‘outperform’ from ‘market perform’.
AmInvestment Bank maintained its ‘buy’ call on the stock. It said, “We make no changes to our earnings forecasts as we expect incremental earnings from contributions by new contracts to be minimal to the overall earnings of the group.”