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M’sian Resources Corp
Buys Out JV Partner Of 348 Sentral
? Takes full control of 348 Sentral. MRCB is buying out its partner in 348 Sentral, an office & service apartment development with a total GDV of RM850m in KL Sentral. It is paying RM105m for a 60% stake in the project held by Gapurna (linked to businessman Dato’ Mohamad Salim bin Fateh Din), boosting its stake in the project to 100%.
? Higher valuation but justifiable. At the price tag, 348 Sentral in its entirety is valued at RM175m. This is at a 60% premium to the valuation of 348 Sentral in its entirety of RM109.5m when MRCB first bought a 40% stake in the project, also from Gapurna, for RM43.8m in Dec 2007. We
believe the higher valuation is justifiable given that: (1) The land value should have appreciated over the last 2-3 years; (2) The project is now
15% completed, via-a-vis just bare land when MRCB first bought the 40% stake; and most importantly (3) Shell has recently been roped in as tenant for 60% of the office space for 15 years. Ceteris paribus, the acquisition will increase MRCB’s net debt and gearing of RM430m and 0.36x as at 31 Mar 2010 to RM535m and 0.43x that is still manageable.
? Forecasts. Maintained as rental income (the project will be held as investment property) will only come in beyond our forecast period. The
completion is expected by 4Q2012.
? Risks. The risks include: (1) New construction contracts secured in FY12/10 coming in below our target of RM500m p.a.; and (2) Rising input
costs.
? Maintain Trading Buy. We are upbeat on the construction sector as we foresee construction stocks to generally outperform the market over the short term, buoyed by news flow, particularly, from the RM36bn KL mass rapid transit (MRT) project and the RM7bn Ampang and Kelana Jaya light rail transit (LRT) line extension project. For MRCB, additional kickers could come from the possibility of it bagging prime Federal land parcels in KL and Sungai Buloh. We estimate that the land parcels could enhance MRCB’s valuation by RM1.2bn or 86sen per share. Indicative fair value is RM2.10 based on “sum of parts” (see Table 4).
Buys Out JV Partner Of 348 Sentral
? Takes full control of 348 Sentral. MRCB is buying out its partner in 348 Sentral, an office & service apartment development with a total GDV of RM850m in KL Sentral. It is paying RM105m for a 60% stake in the project held by Gapurna (linked to businessman Dato’ Mohamad Salim bin Fateh Din), boosting its stake in the project to 100%.
? Higher valuation but justifiable. At the price tag, 348 Sentral in its entirety is valued at RM175m. This is at a 60% premium to the valuation of 348 Sentral in its entirety of RM109.5m when MRCB first bought a 40% stake in the project, also from Gapurna, for RM43.8m in Dec 2007. We
believe the higher valuation is justifiable given that: (1) The land value should have appreciated over the last 2-3 years; (2) The project is now
15% completed, via-a-vis just bare land when MRCB first bought the 40% stake; and most importantly (3) Shell has recently been roped in as tenant for 60% of the office space for 15 years. Ceteris paribus, the acquisition will increase MRCB’s net debt and gearing of RM430m and 0.36x as at 31 Mar 2010 to RM535m and 0.43x that is still manageable.
? Forecasts. Maintained as rental income (the project will be held as investment property) will only come in beyond our forecast period. The
completion is expected by 4Q2012.
? Risks. The risks include: (1) New construction contracts secured in FY12/10 coming in below our target of RM500m p.a.; and (2) Rising input
costs.
? Maintain Trading Buy. We are upbeat on the construction sector as we foresee construction stocks to generally outperform the market over the short term, buoyed by news flow, particularly, from the RM36bn KL mass rapid transit (MRT) project and the RM7bn Ampang and Kelana Jaya light rail transit (LRT) line extension project. For MRCB, additional kickers could come from the possibility of it bagging prime Federal land parcels in KL and Sungai Buloh. We estimate that the land parcels could enhance MRCB’s valuation by RM1.2bn or 86sen per share. Indicative fair value is RM2.10 based on “sum of parts” (see Table 4).
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