Stable outlook for MRCB
Continuation of LRT3 project, EDL compensation boost company
PETALING JAYA: The outlook for Malaysian Resources Corp Bhd (MRCB) has improved after the uncertainties over the continuation of the light rail transit 3 (LRT3) and compensation for the Eastern Dispersal Link Expressway (EDL) have been ironed out.
Upon resumption of trading at 2.30pm yesterday, shares in the construction and property development company rose one sen to close at 77.5 sen, with 83.4 million shares changing hands. The counter was suspended in the first half of the day before turning out to be the second-most actively traded stock.
MRCB announced yesterday that its wholly owned subsidiary, MRCB Lingkaran Selatan Sdn Bhd (MLSSB), had signed the termination and concession agreement with the government on the concession for the EDL in Johor.
It said under the agreement, the government would pay the group RM1.33bil, as announced under Budget 2019 on Nov 2. The agreement with the government for the termination and settlement would be backdated to Jan 1, 2018, it added.
According to MRCB, the total cost and net book value of the EDL service concession asset were approximately RM1.33bil and RM1.14bil, respectively, as at Nov 8.
“The total cost of the EDL service concession asset comprises the cost of land acquired (including expenditure that is directly attributable to the acquisition of land) and the cost for the construction and development of the EDL (inclusive of the cost of reconstruction and rehabilitation),” MRCB said.
“The cost of the EDL service concession asset was incurred from November 2008 to December 2017,” it added.
In a note last Thursday, AmBank Research said it had upgraded its fair value for MRCB to reflect a higher valuation for the EDL. The brokerage rated the counter as a “hold”, with a revised fair value of 82 sen, compared with 80 sen previously.
“The government’s decision to continue the LRT3 and compensate for the EDL has cleared the uncertainties in MRCB; and thus provides better visibility for the future,” AmBank Research said.
“We believe the outlook for MRCB remains stable premised on its strong property unbilled sales of RM1.6bil, a robust outstanding construction order book of RM4.8bil and outstanding LRT jobs of RM11.86bil,” it added.
Last month, MRCB and its partner George Kent Sdn Bhd received a letter of award from Prasarana Malaysia Bhd, informing them that the government had agreed to continue with the LRT3 project at a total cost of RM16.6bil, including land acquisition costs, interest during construction and other costs. The implementation concept of the project would be remodelled from a project delivery partner regime to a fixed-price contract regime.
On the EDL, it was mentioned early this month under Budget 2019 that the government would provide compensation of RM1.3bil for the acquisition of the EDL in Johor.
As a background, MLSSB was awarded the EDL concession by the government under a 34-year concession agreement signed on June 26, 2007.
Under the concession agreement, MLSSB was granted the right to design, construct, manage, operate and maintain the EDL, as well as collect toll.
As part of the financing for the construction and development of the EDL, MLSSB’s unit MRCB Southern Link Bhd had on June 23, 2008, issued senior sukuk of RM845mil and junior sukuk of RM199mil.
MLSSB had also obtained a RM220mil term loan to build the EDL. The term loan was fully settled during the financial year ended Dec 31, 2017.
The EDL was completed and the “Sijil Kesempurnaan Pembinaan Lebuhraya” was issued by Lembaga Lebuhraya Malaysia in March 2012.
On Dec 22, 2017, MLSSB received a letter from the Works Ministry, informing the company of the abolishment of toll collection on the EDL effective Jan 1, 2018, and that the concession period of the EDL would end on Dec 31, 2017 and the government would take over the EDL thereafter.
The government also revoked the authorisation previously granted to MLSSB to collect toll on the EDL, to take effect on Jan 1, 2018.