20-05-2025
Latest MRCB project win lifts order book closer to RM6bil
PETALING JAYA: The announcement that Malaysian Resources Corp Bhd (MRCB) has been awarded the contract to build the Shah Alam Sports Complex brings the property and construction company's order book closer to the RM6bil target for this year, analysts say.
The contract from Menteri Besar Selangor Inc (MBI) was announced last Friday.
The project value of RM2.94bil exceeded the company's earlier guidance of RM1.5bil as the scope of work has widened and takes MRCB's order book to RM5.4bil.
Analysts at Hong Leong Investment Bank Research (HLIB Research) and CIMB Research have maintained their 'buy' calls on the stock, with target price of 67 sen and 83 sen, respectively.
HLIB Research said MRCB's total year-to-date order book far exceeded its assumption of RM4bil for this year and now expects the order book to rise to RM6bil with core profit after tax and minority interest tweaked by minus 0.9% for this year and 2.5% for 2026 while expecting earnings of RM88.7mil for 2027.
The research house said management anticipates a pre-tax profit margin of 5% from the project with financing costs baked into the contract value.
Terms of payment for the 48-month project would be through a land swap not exceeding RM200mil subject to agreement, with the remainder in cash.
MRCB's management shared that the payment would be on deferred basis.
HLIB Research said the deferred payment would likely result in the company having a higher net gearing that currently stands at 0.27 times.
It said MRCB would likely manage its balance sheet through asset disposals to free up cash while there could be the potential conversion of the KL Sentral redevelopment project later this year that may boost the order book to beyond the RM10bil mark.
CIMB Research said, given the highly specialised nature of the project, the contract could fetch a fairly attractive operating margin of between 5% and 8% minus financing costs with minimal execution risk given MRCB's track record.
Construction is scheduled to begin in November for a targeted completion in 2029.
The research house said that the three-fold increase in the contract value comes with a far lower funding risk as most of the construction work would be paid in cash apart from the 7% to be paid through a land swap versus the initial value to be paid entirely through a land swap.
The research house said MRCB also has sufficient balance-sheet headroom and the option to monetise non-core assets if needed.
CIMB Research said, despite MRCB's year-to-date project wins meeting 90% of the company's order book target of RM6bil, it was maintaining its earnings forecasts for now pending the detailed design and project specifications expected in six months time.
