MRCB to see stronger earnings through LRT 3 consolidation, says HLIB

KUALA LUMPUR (May 17): Malaysian Resources Corporation Bhd (MRCB) could see a stronger earnings performance moving forward supported by the consolidation of the Light Rail Transit 3 (LRT 3) project, according to Hong Leong Investment Bank (HLIB) Research.

In a research note on Tuesday (May 17), HLIB highlighted that following a recent virtual briefing, it also considers MRCB to be a strong contender for Mass Rapid Transit 3 (MRT 3) civil packages, with it being the largest listed bumiputera contractor. 

The research house also increased its target price for MRCB to 43 sen (from 38 sen) as it foresees the company as a MRT 3 laggard play considering its weaker share price performance compared to its peers. 

“The LRT 3 project has achieved a completion rate of 70%, and could potentially reach 80% by end-2022.

“Recall that the remaining 50% of the LRT 3 joint venture was taken over by MRCB in 4Q21 (the fourth quarter of 2021) and should thus boost the company’s top and bottom lines substantially in FY22 (the financial year ending Dec 31, 2022).

“The project has progressed into the systems stage, therefore steel and cement intensity should drop off significantly,” the research house said of the LRT 3 project. 

Meanwhile, on the impact of rising material prices on MRCB's external projects, HLIB said the company had pointed out that 45% of its active construction order book is in advanced phases (70% to 91% completed). 

To this end, MRCB’s lack of job wins for the past two years is paradoxically a positive, the research house stressed. 

“Assuming that net gearing increases to a manageable 0.5 times, MRCB could stomach a sizeable RM1 billion to facilitate the execution of the project. 

“We consider MRCB to be a strong contender for the elevated packages as they are reserved for domestic-only participation with a 60% minimum bumiputera allocation,” HLIB added on the group’s prospects for MRT 3.

At the time of writing on Tuesday, shares in MRCB were traded unchanged at 34.5 sen, giving it a market capitalisation of RM1.54 billion. 

Edited by Surin Murugiah. 

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