CIMB Research more upbeat on MRCB’s prospects

A mutual termination of the 100%-owned Eastern Dispersal Link (EDL) concession appears under way

KUALA LUMPUR: CIMB Equities Research is more upbeat on Malaysian Resources Corporation Bhd’s (MRCB) infrastructure and highway divestment prospects in 2018.

It said on Wednesday a mutual termination of the 100%-owned Eastern Dispersal Link (EDL) concession appears under way. 

“Although the pricing is still unknown, the termination would reduce debt significantly, by some 25%,” it said. 

CIMB Research also pointed out MRCB’s RM2.9bil jobs in tender remain understated.

It added that MRCB’s FY19-20F earnings per share (EPS) could almost double if it secures the project delivery partner (PDP) role of the Kuala Lumpur-Singapore High-Speed Rail’s (HSR) infrastructure construction on the Malaysian side. MRCB and Gamuda have teamed up on a 50:50 basis.

“Rail contracts newsflow in 1H18 could lift sentiment and further catalyse the stock. Remains an Add with a higher target price (10% RNAV discount) of RM1.31 from RM1.19),” it said.

The research house believes the worst is over for MRCB’s share price, having fallen 3.5% in 2017. 

The stock trades at a 20% discount to its fully diluted realised net asset value (RNAV) of RM1.45. 

“This is unjustified, in our view, given the renewed infra/order replenishment outlook and revival of the EDL divestment angle which is long overdue. 

“We think the group’s RM2.9bil total value of jobs in tender has more upside in 2018. Our assumed RM800mil job wins per annum could be exceeded if it achieves higher-than-expected success rates for its rail tenders,” it said.