Hong Leong Investment Bank (HLIB) Research expects Malaysian Resources Corporation Bhd's (MRCB) orderbook at about RM2.4bil.
KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research is retaining Malaysian Resources Corporation Bhd
's (MRCB) target price of RM1.22 which is based on a rather stretched FY16 to FY17 price-to-earnings of 35 times and 36 times.
It said on Monday while MRCB has been successful in participating in recent catalytic projects, it remains cautious on the earnings delivery.
Last Friday, MRCB bagged a RM188.7mil contract from the Department of Irrigation and Drainage involving the rehabilitation (phase three) of Sungai Pahang, Pekan on a design and build basis.
The contract involves extending an additional 345 metres length to the breakwater constructed under phase two and river protection works which are scheduled for completion by July 2018.
With this contract in the bag, MRCB’s job wins year-to-date total RM893mil.
“We estimate its orderbook to currently stand at RM2.4bil, implying a healthy cover ratio of 3.1 times on FY15 construction revenue,” said the research house.
HLIB Research also said last week, MRCB also finalised the sale and purchase (S&P) agreement with MRCB Quill REIT (Buy, TP: RM1.25) involving the disposal of Menara Shell to the latter for RM640mil.
The purchase consideration will be satisfied via new MRCB-Quill shares issued to MRCB with an aggregate value of between RM110mil and RM152mil and the balance of RM488mil to RM530mil cash.
MRCB-Quill REIT is a 31.2% associate of MRCB. Having seen this proposed asset disposal undergoing a timeline extension twice since December 2015, it is positive that the S&P has finally been signed.
MRCB is expected to register a gain on disposal of RM139mil.
“Consistency in core earnings delivery remains lacking from quarter to quarter. As YTD job wins of RM893mil have surpassed our full year target of RM800mil, there is potential upside to our earnings estimate.
“However, judging from the razor thin construction margins recorded in 1QFY16 (EBIT: 0.5%), we are in no hurry to revise our earnings estimate upwards,” it said.
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