Monday, January 25, 2010

HDBSVR sees fresh catalysts for MRCB

KUALA LUMPUr: Hwang DBS Vickers Research (HDBSVR) has a Buy on Malaysia Resources Corporation Bhd (MRCB) at RM1.60 due to fresh catalysts among which are a sizeable government land deal and more high margin environmental projects in the pipeline.

It said on Monday, 25 it had a BUY on MRCB with a target price of RM1.80 (ex-right) and RM2.20 (cum-rights). Its recommendation on MRCB was for a leveraged proxy to the CONSTRUCTION [] and property sector.

"We think the completion of its rights issue by 1Q10 is a precursor to strategic land acquisitions. Besides the 3 sought after pieces of land (50-60 acres at Jalan Cochrane, 25 acres at Ampang Hilir and 3,400 acres at RRIM), we understand there is another 20-30 acres of land within the KL Sentral/Brickfields vicinity," it said.

MRCB is the strongest contender with monopoly of the maturing KL Sentral franchise with 12 acres remaining. A reasonable time line for award for these landbank is in June-2010 during the tabling of the 10MP.

"Assuming MRCB clinches just the 20-30 acres of additional KL Sentral land, our sum-of-parts value will rise by 28% to RM2.30 (ex-rights). Our assumptions impute a conservative plot ratio of 8 times and average selling price of RM700 per sq ft.

"We also like MRCB’s chances for the chunky Jalan Cochrane and Rubber Research Institute Malaysia land with its strong shareholder backing from EPF giving it an edge in terms of accessibility to funding," it said.

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