KL Sentral redevelopment offers prime opportunity for MRCB's commercial expansion

KUALA LUMPUR: The redevelopment of KL Sentral Station on a private-finance-initiative (PFI) basis with Malaysian Resources Corp Bhd (MRCB) at a cost of more than RM1bil is a well-timed chance to enhance the company’s commercial presence in a prime and strategic area, according to Hong Leong Investment Bank (HLIB) Research.

“We view this as a timely opportunity to expand MRCB’s commercial exposure in a prime and strategic location. From what we gather, demand has been strong historically, with residential developments seeing take-up rates of 85% and above,” the research house said.

HLIB said back-of-the-envelope calculations suggested that post disposal of MenaraCelcomDigi, this project (RM1bil) in isolation could increase net gearing from 0.27x to a still manageable 0.49x.

“Nevertheless, if MRCB undertakes this project concurrently with the Shah Alam Stadium redevelopment (over RM1bil), this could take net gearing beyond 0.49x, by our estimates,” it added

According to Transport Minister Anthony Loke, the Cabinet has agreed in principle on the re-development of the transportation hub Kuala Lumpur Sentral and this will be without having any financial implication to the government.

As part of this agreement, MRCB will be given air rights to develop commercial and residential buildings.

MRCB announced that they will be making announcements as and when the terms are finalised. Going forward, MRCB will be entering direct negotiations after receiving the non-binding LOI.

HLIB has maintained a “hold” on MRCB with unchanged SOP-driven target price of 34 sen. It said its target price implied a FY23f/24f/25f P/E multiple of 30.9x/22.7x/21.4x.