Thursday, November 4, 2010

MRCB advances in active trade, TP at RM2.90

KUALA LUMPUR: Shares of MALAYSIAN RESOURCES CORP [] Bhd rose in active trade in late afternoon on Thursday, Nov 4 after it was recently upgraded by a local research house due to MRCB's strong proxy to the 10th Malaysia Plan (10MP).

At 3.21pm, MRCB was up 10 sen to RM2.17. There were 10.9 million shares done.

The FBM KLCI was up 1.87 points to 1,509.47. Turnover was 858.37 million shares done valued at RM1.01 billion. There were 371 gainers, 356 losers and 305 stocks unchanged.

Hwang DBS Vickers Research (HDBSVR) said MRCB strong proxy to 10MP projects and raised its target price to RM2.90

'We raised FY11-FY12F earnings by 13-27% after imputing larger new contract wins of RM600m p.a (vs RM400 million to RM600 million previously), and the launch of Lot D in 2H 2011 (GDV RM1.2 billion; average selling price RM900-RM1200 psf, JV with CapitaLand and Quill),' it said.

HDBSVR said it raised TP to RM2.90, also accounting for (i) higher RM1,200 psf ASP for the remaining 12 acres of land in KL Sentral premised on a scarcity premium for the strong maturing franchise. The last benchmark for office was Lot G at more than RM1,000 psf, similar for recent strata units for Lot B; (ii) higher values for its concessions, EDL and Duke, and (iii) inclusion of building services business at 10x CY11 PE.

HDBSVR said pending a formal participation in the Rubber Research Institute Malaysia (RRIM) land, MRCB seems set to capitalise on more 10MP projects, which carry stronger emphasis on environmental projects.

With the mass rapid transit (MRT) closer to receiving Cabinet approval, MRCB's fortune is even brighter with the red and green line converging at RRIM.

'It will benefit from: (i) better pricing power over our RM300 psf assumption. Every RM100 psf increase will raise our SOP by 7%, and (ii) it will likely receive a sizable portion of MRT CONSTRUCTION [] works for the portion leading to the RRIM land. Another wildcard could be MRCB's involvement in the redevelopment of Pudu Jail given its prior work for Gaya Bangsar condominium,' said the research house.


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