KUALA LUMPUR: Malaysian Resources Corp Bhd's (MRCB) job replenishment prospects are promising, not least because it remains a frontrunner for the Mass Rapid Transit 3 (MRT3) civil works tenders, say analysts.
According to Hong Leong Investment Bank (HLIB), there could be wins from the waste-to-energy (WTE) project and MRT3 going forward following its securing of the flood mitigation project.
"We continue to see MRCB as a strong contender for the elevated packages as they are reserved for domestic only participation with 50% minimum Bumiputera participation in the JV-co (minimum effective stake: 31%).
"There has also been progress on MRCB’s sizable WTE project, with service agreement to be formalised," it said in a note.
It added that the WTE project will carry orderbook replenishment opportunity, which is timely while waiting for the MRT3 awards.
HLIB noted that MRCB’s outstanding orderbook stood at RM18.9bil, which is roughly 21x cover on FY21 construction revenue.
The company recently received a letter of award for the Muara Sg. Pahang Phase 3 flood mitigation project worth RM380mil, which carries a “low double digit” margin with an execution period of four to five years.
Post-award conversion of the project, the company's tender book depleted to RM35mil.
MRCB recently announced core profit after tax and minority interest of RM14mil in 1QFY22, which was within HLIB's expectation and beat consensus' at 25% and 41% of full-year forecasts respectively. MRCB's management said moving forward it expected a gradual sequential improvement in earnings.
HLIB maintained its "buy" rating with a higher target price of 46 sen post-earnings adjustment and rolling forward base to mid-FY22.
Meanwhile, RHB Research said MRCB's core profit of RM14mil beat its expectation at 48% of its full-year forecast amid larger-than-expected contributions from the Light Rapid Transit 3 project.
It upgraded its recommendation to "buy" with a higher target price of 44 sen.
"Our upgrade stems from its better job replenishment prospects – from MRT3 and WTE projects – as jobs are expected to flow through.
"As about 45% of its on-going projects are in advanced phases, the fluctuation in raw material prices should not affect its numbers greatly," it said.