MRCB's net gearing could exceed 0.49 times if KL Sentral, Shah Alam Sports Complex redeveloped concurrently — HLIB Research

• In a note on Thursday (Aug 3), analyst Edwin Woo said rough calculations show that net gearing levels could rise to 0.49 times if the redevelopment of KL Sentral alone — which is estimated to cost over RM1 billion — took place after the disposal of Menara CelcomDigi to Sentral REIT.

KUALA LUMPUR (Aug 3): Malaysian Resources Corp Bhd's (MRCB) net gearing levels could surpass 0.49 times if it undertakes the redevelopment of transport hub KL Sentral simultaneously with that of the Shah Alam Sports Complex, said Hong Leong Investment Bank (HLIB) Research.

In a note on Thursday (Aug 3), analyst Edwin Woo said rough calculations show that net gearing levels could rise to 0.49 times if the redevelopment of KL Sentral alone — which is estimated to cost over RM1 billion — took place after the disposal of Menara CelcomDigi to Sentral REIT.

According to the group's financial statement for the year ended Dec 31, 2022, its gearing level stood at 0.45 times.

MRCB was given a letter of intent by the Selangor government to create a proposal for the redevelopment of Shah Alam Sports Complex in Section 13, Shah Alam, which includes the area's namesake stadium and its surrounding Malawati Stadium, Shah Alam Mini Stadium, and Shah Alam Extreme Park.

On Wednesday, Transport Minister Anthony Loke said the Cabinet had approved in principle the redevelopment of KL Sentral.

According to him, the project will be done via privatisation at an estimated cost of over RM1 billion, which MRCB will shoulder, in return for the rights to develop the area above the station with commercial and residential buildings.

Woo, in his note, said: "Given that the (KL Sentral) project will be done on a private-finance initiative (PFI) basis, MRCB's monetisation timeline will be a relatively long one — when residential and/or commercial units are developed and sold.

"This will take place once redevelopment of the station is complete. From what we gather, demand has been strong historically, with residential developments seeing take-up rates of 85% and above."

Woo believed that there are five acres of land that are not developed yet in KL Sentral, out of the original 60 acres, and thus the redevelopment is a timely opportunity for MRCB to widen its commercial exposure in a prime and strategic location.

According to him, KL Sentral has a gross development value of RM18 billion while over 200,000 commuters pass through the station daily.

"At a designed daily capacity of 100,000, the station has been due for upgrades for some time," he noted.

Woo kept his "hold" rating on the stock, with an unchanged sum-of-parts derived target price of 34 sen, which implies a price-earnings multiple of 30.9 times for its forecasted FY2023 performance, 22.7 times for FY2024, and 21.4 times for FY2025.

At the midday break, MRCB shares were up 1.5 sen or four sen at 39 sen, for a market capitalisation of RM1.74 billion.

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