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Thursday, August 18, 2011

Ampang rail deal a timely boost for MRCB (BT)

The RM1.33 billion Ampang rail contract won by the Malaysian Resources Corp Bhd (MRCB) has come in the nick of time to save its order book and earnings from falling, analysts said.

As at June 30 this year, MRCB's order book is worth RM1.24 billion and mostly comprises property development activities at its Kuala Lumpur Sentral project in Brickfields.

External contracts worth RM312 million include construction jobs to build a highway, hospital and college in Johor. These projects are due to be completed by early next year.

"It is a good time to replenish to give MRCB longer visibility and a good jump in construction earnings," Maybank Investment Bank head of research Wong Chew Hann told Business Times.

An analyst with OSK Investment Bank said it is crucial for MRCB to get the contract to strengthen its financial position.

OSK has a "buy" call on the stock with a target price of RM3.30.

MIDF Research expects significant contribution from the contract to kick in next year and has raised its earnings forecast for fiscal 2012 by 29 per cent.

It has also upgraded its recommendation to "buy" with a target price of RM2.66.

MIDF analyst Sean Liong Cheng Fatt believes MRCB is in the running for the mass rapid transit project.

Jonathan Lai, an equity analyst at UOB KayHian, said assuming a 5 per cent margin, it expects a pre-tax profit contribution of about RM20 million per year for MRCB from 2012 until 2014.

UOB KayHian is maintaining its "buy" call on MRCB with a target price of RM3.02.

"Our positive conviction on MRCB is reinforced after the recent award. We continue to believe in its imminent growth going forward, largely emanating from the strong performance in KL Sentral, potential development in RRI land, Sg Buloh, "River of Life" project and more prime land acquisitions in the pipeline," he told Business Times.

Kenanga Research estimates MRCB's revenue to increase to RM1.16 billion this year and RM1.64 billion next year from the RM1.07 billion in 2010.

It also expects pre-tax profit to rise to RM94.6 million and RM181.3 million in 2011 and 2012 respectively, compared to the RM67.3 million posted last year.

Kenanga is keeping the share as "outperform" with a higher target price of RM3.44.

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