MRCB 1Q net profit up, but warns of significantly weaker performance in 2Q due to Covid-19 outbreak

KUALA LUMPUR (June 27): Malaysian Resources Corp Bhd’s (MRCB) net profit more than tripled to RM15.65 million in the first quarter ended March 31, 2020 (1QFY20), from RM4.14 million last year, mainly due to higher contribution from its property and investment segment.

MRCB explained that the higher earnings were due to the commencement of revenue recognition from the group’s 1060 Carnegie development in Melbourne upon the handover of units to purchasers, and further construction progress and revenue recognition from the Sentral Suites development in KL Sentral.

Earnings per share ballooned to 35 sen from nine sen in 1QFY19.

Quarterly revenue rose 82% to RM425.75 million, from RM243.05 million last year, showed a filing with Bursa Malaysia yesterday.

Noting that the financial quarter under review only covers the initial part of the movement control order, MRCB’s group managing director Imran Salim said a “significantly weaker performance in the second quarter” is anticipated.

“Although work has now slowly resumed at all our construction sites, we believe the outlook for the economy and the property market will remain challenging for the foreseeable future and we have embarked on austerity and cost cutting measures to mitigate the impact,” Imran added.

“The company’s immediate priorities in 2020 are to enhance cashflow and monetising its inventory of unsold completed stock,” said MRCB, adding that the group will continue to closely monitor conditions in the broader economy and property market, revising its strategies and financial targets accordingly, including reviewing its future launches if conditions dictate.

As at March 31, 2020, the group’s property development and investment division sold RM36.3 million worth of properties in 2020.

MRCB noted that the revenue and operating profit in the property development and investment division will continue to be progressively recognised in line with construction progress in 2020 and beyond.

With interests in 323 acres of urban land, the group has a sustainable supply of future projects over the long term with a total gross development value of RM32 billion.

“The division also earns a relatively stable income stream from its remaining investment property in Shah Alam and from Celcom Tower, as well as its 27.94% interest in MQ REIT,” said MRCB.

Under the engineering, construction and environment division, MRCB continues to actively tender for more contracting projects to replenish its order book. As at March 31, 2020, the external client order book stood at RM21.9 billion.

MRCB has also tendered RM2.52 billion worth of jobs and is placing greater emphasis on seeking infrastructure projects.

The group expects profit recognition from the LRT3 project, which is currently 29% complete, to pick up in 2020, albeit at a slower pace due to the implementation of stricter standard operating procedures to prevent the spread of Covid-19.

As at March 31, 2020, the unbilled construction order book stood at RM20.7 billion.

Shares of MRCB closed unchanged at 47 sen today, valuing the counter at RM2.07 billion. Over the past year, the stock fell some 50% from 94.5 sen. Still, it had recovered and was up 54.1% from this year’s low of 30.5 sen.

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