Malaysian Resources Corporation Bhd
(July 1, RM1.21)
Maintain buy with an unchanged target price (TP) of RM2.22:
We reiterate our “buy” call on Malaysian Resources Corporation Bhd (MRCB) with an unchanged fair value of RM2.22 per share, a 20% discount to its net asset value (NAV). The Star reported that MRCB is tipped to refurbish various sports facilities within the National Sports Complex (NSC) in Bukit Jalil. 

The buildings within the NSC premises include the Bukit Jalil National Stadium, the Putra Stadium, the National Hockey Stadium, the National Aquatic Centre and the National Squash Centre. These facilities were constructed by the UEM-Renong group back in the 1990s for the 1998 Commonwealth Games, which Malaysia hosted. 

However, the buildings have not undergone any significant refurbishment works since then. For example, the Bukit Jalil stadium — now 17 years old — is still the main venue for sporting events held in Malaysia. The Star report revealed that the refurbishment work could entail a budget of about RM1 billion.  

MRCB is said to have submitted a proposal to the Youth and Sports Ministry and is awaiting a decision from the latter. In return for undertaking these initiatives, we understand that MRCB is to receive parcels of land in the vicinity of the NSC. 

We maintain our earnings forecast for now pending more clarification of this latest development. The funding is another key consideration. But should it come through and the terms are favourable, such a proposal could provide MRCB with access to prime development land within the mature Bukit Jalil neighbourhood. 

Based on our checks, development land in Bukit Jalil is difficult to secure — particularly the tracts of land within the NSC. A few of the notable ongoing projects within the area include Pavilion 2 under a joint venture between Malton Bhd and Ho Hup Construction Company Bhd.  

From a strategic standpoint, we like MRCB’s continued endeavours to increase its land bank via innovative proposals. This puts the group firmly ahead in its transformation into a property-centric group. At the same time, more asset monetisation and deleveraging moves could be on the cards via MRCB-Quill REIT. The stock is currently trading at a steep 57% discount to its NAV. — AmResearch, July 1


This article first appeared in The Edge Financial Daily, July 02, 2015.

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