The Sun (Malaysia)
RM4.8b jobs give MRCB long-term earnings visibility: Analysts
PETALING JAYA: Analysts are bullish on Malaysian Resources Corp Bhd (MRCB)’s RM4.8 billion worth of jobs win announced on Wednesday as these will provide the group with long-term earnings visibility.
HLIB Research said although the management contract with Kwasa Utama Sdn Bhd is indeed sizable at RM3.1 billion, the impact to earnings in the near term is unlikely to be profound as its duration will be spread across 12 years.
“That said, we are positive on this contract win as it would provide MRCB a steady stream of work flow for over a decade. Assuming work is conducted equally across its targeted duration, the contract would feed MRCB with RM262 million worth of jobs a year from 2016 to 2027,” it said in a report yesterday.
It added that the National Sports Complex (NSC) upgrading job significantly boosts MRCB’s year-to-date job wins to RM2.2 billion. This in turn, would bring its orderbook to RM3.1 billion, excluding the management contract and LRT3 project delivery partner role. Overall, this translates to a superior orderbook cover ratio of six times on FY14 construction revenue.
“As year-to-date job wins have significantly exceeded our full year target of RM500 million, there is certainly an upside bias to our earnings forecast, pending further clarification.”
It maintained a “buy” call on MRCB with a target price of RM1.36, adding that these contracts along with the CCC development will serve as a positive share price catalyst.
“Whilst still in its early days, we reckon that MRCB’s new management is on the right path (albeit at a slow pace) to turn the company around,” said HLIB.
Meanwhile, AmResearch said for the refurbishment and upgrading of facilities at NSC in Bukit Jalil, MRCB is required to provide performance bonds and, in return, MRCB will receive 92 acres of land within the NSC.
“While this does not come entirely as a surprise, we view this latest development positively as it enables MRCB to gain instant access to a large tract of prime development land in Bukit Jalil with immediate development potential,” the research house said.
For the Kwasa Utama deal, assuming a management fee of 3%, AmResearch estimates total pre-tax profits of RM94 million (RM8 million per year) during this period.
It maintained its buy call on MRCB with an unchanged fair value of RM1.65 per share.
“We maintain our estimates for now with an upside bias following the latest slew of NAV (net asset value)-accretive announcements. Just on Phase 1 of CCC and the Kwasa Utama management contract, we estimate a combined NAV uplift of 8% (RM408 million or 21 sen per share).”