MALAYSIAN RESOURCES CORP BHD

Target price: RM1.89

AMINVESTMENT Bank Research maintained its buy call on MRCB with an unchanged fair value of RM1.89, based on a 10% discount to its revalued net asset value (RNAV).

The research house said it made no changes to its earnings forecasts as it had imputed the potential future contribution from the proposed development in its RNAV calculations.

MRCB’s 85%-owned Rukun Juang Sdn Bhd (RJSB), EPF’s unit Tanjung Wibawa Sdn Bhd (TWSB), and Bukit Jalil Property Sdn Bhd (Bukit Jalil Sentral) had on May 31 entered into a subscription and shareholders’ agreement. The agreement sees RJSB and TWSB co-investing into a special purpose company, namely Bukit Jalil Sentral, to jointly develop the land and the proposed disposal by RJSB of the land to the joint venture (JV) company for an aggregated consideration of up to RM 1.43bil (RM430 psf).

RJSB and TWSB will subscribe for new ordinary shares and new redeemable preference shares – class A in the JV company.

In turn, the JV company shall appoint a subsidiary of MRCB to be the management contractor for the design and construction of the future development to be carried out on the lands, subject to a management fee. RJSB will then procure the management contractor to subscribe for 1,000 new redeemable preference shares – class B (RPSB) in JV Co at an issue price of RM1 per RPSB.

Am Investment Bank said it is positive on the proposed JV as this would allow MRCB to carry out the large-scale development with the support and credibility of the EPF.

“It will also reduce MRCB’s burden of having to finance the entire project by itself, and free up its cash to allow it to undertake other development projects it has in its stable,” it said.