MRCB’s share price lifted by Kwasa Land job

KUALA LUMPUR: Malaysia Resources Corp Bhd’s (MRCB) share price climbed as high as to RM1.77 yesterday before easing to end three sen or 1.75% higher at RM1.74, boosted by news that it had clinched a RM7 billion contract from Kwasa Land Sdn Bhd to develop the MX-1 project.

The MX-1 is slated to be the main town centre of the Kwasa Damansara township development to be undertaken by Kwasa Land Sdn Bhd, a wholly-owned subsidiary of the Employees Provident Fund (EPF).

At yesterday’s closing price, MRCB’s market capitalisation stood at RM 3.06 billion. The counter also saw 5.75 million shares changing hands.

An analyst with a bank-backed brokerage told The Edge Financial Daily yesterday that the size of the 64.1-acre (25.9ha) MX-1 project was similar to that of the Kuala Lumpur Sentral central business district (CBD), which was also developed by MRCB.

“MRCB will be able to bring in the same concept of building a transportation hub with commercial developments to Kwasa Damansara,” said the analyst, adding that the MX-1 is positive for MRCB.

With an estimated gross development value (GDV) of RM7 billion, MX-1 marks the inaugural development of the 2,330-acre Kwasa Land township to be built on land bordering Sungei Buloh and Petaling Jaya. MX-1 will be fully completed in 12 years.

AmResearch analyst Mak Hoy Ken also deems the deal as positive, as MX-1 is one of the prime parcels of the Kwasa Damansara project.

“We believe that MRCB’s track record in developing the KL Sentral integrated transport hub and development was pivotal in its successful bid for MX-1,” Mak said in a note yesterday.

The group will be reclassified from Bursa Malaysia’s construction sector to the property sector on July 7, he said.

MRCB beat five other submissions to win the mandate to develop MX-1.

The deal comes shortly after MRCB had reached a settlement agreement with Perbadanan Kemajuan Negeri Selangor (PKNS) when the former acquired a 70% stake in PJ Sentral Development from Nusa Gapurna Development Sdn Bhd.

Mak is maintaining a “buy” rating on MRCB at RM1.71, with an unchanged fair value of RM2.20.

MIDF Research believes that MRCB has the right capability to undertake the proposed commercial development as MX-1’s concept is to be modelled after the KL Sentral development.

“We are not surprised with this award as we have anticipated the possibility of MRCB winning this project. In our worst-case scenario, assuming a project duration of 12 years and a net margin of 15%, the MX-1 could fetch an average annual net profit of RM87 million until 2027,” the research house said.

It is reaffirming a “buy” call on the stock, with an unchanged target price of RM2.16.

“Nonetheless, we may raise our target price higher to RM2.65 upon signing of the MX-1 agreement as well as the completion of the recent purchase of an additional 30% stake in PJ Sentral,” MIDF Research said.

This article first appeared in The Edge Financial Daily, on July 2, 2014.