MRCB’s concerns over LRT3 resolved with LOA, EDL compensation

KUCHING: Malaysian Resources Corporation Bhd’s ( MRCB) concerns over the Light Rail Transit Line 3 ( LRT 3) and Eastern Dispersal Link ( EDL) compensation has now been been resolved, and hence, analysts opine this will provide better visibility for the group’s future.

In a filing on Bursa Malaysia, MRCB announced that MRCB George Kent Sdn Bhd, has received a letter of appointment (LOA) dated November 2, 2018 from Prasarana Malaysia Bhd for the award of the contract for the proposed design, construction, completion, testing and commissioning of LRT 3 from Bandar Utama to Johan Setia.

“The contract sum of the project is fixed at RM11.856 billion and includes a contingency or provisional sum of RM400 million, which, if not utilised, will reduce the contract sum,” the filing read.

AmInvestment Bank Bhd (AmInvestment Bank) highlighted that the RM11.86 billion amount is consistent with the RM16.6 billion figure announced by the government previously, as the latest number is purely for civil works and it excludes land acquisition, interest during construction etc, amounting to RM4.8 billion.

“Therefore, we made no changes to our estimates,” the research firm said. It’s core net profit estimates for financial year 2018 ( FY18F), FY19F and FY20F amounted to RM88.9 million, RM159.4 million and RM177 million, respectively.

As for the abolishment of toll collection on MRCB’s EDL, AmInvestment Bank noted that the government has allocated RM1.3 billion in Budget 2019 as full compensation to the group.

“So far, no notice has been given regarding the date of payment and the management is still negotiating with the government.”

Still, AmInvestment Bank pointed out that the government’s decision to continue the LRT3 and compensate for the EDL has cleared the uncertainties in MRCB and “thus provide better visibility for the future”.

The research firm believed the outlook for MRCB remains stable, premised on the group’s strong property unbilled sales of RM1.6 billion, a robust outstanding construction order book of RM4.8 billion and outstanding LRT jobs of RM11.86 billion.