LRT3 set to boost MRCB’s earnings

KUALA LUMPUR (Sept 8): Malaysian Resources Corp Bhd (MRCB) expects to see a surge in its earnings by 28% for financial year ending Dec 31, 2016 (FY16) contributed by the RM9 billion light rail transit Line 3 (LRT3) project, the digitalEdge DAILY reported today.

MRCB's joint venture with George Kent (M) Bhd was appointed as project delivery partner (PDP) for the rail project last Friday.

The project owner, Prasarana Malaysia Bhd targets to complete the pre-qualification of contractors by December this year and commence construction work in early 2016. The project is due for completion in Aug 31, 2020.

CIMB Research senior analyst, Shahrizan Rosely said the award would translate into RM19 million to RM25 million net profit for MRCB in FY16 and FY17 respectively, and this will progressively grow higher towards the project’s completion in 2020, Shahrizan said.

However, he noted that the downside risks to the 6% PDP fees are cost overruns, variation orders and delays.

"This is the reason that the next tender phase for the seven civil work packages remain crucial," said Shahrizan in a note to clients yesterday.

HLIB Research sees MRCB's FY16 and FY17 earnings being enhanced by RM31 million to RM41 million with the new project.

Meanwhile, Kenanga Research said that the PDP for LRT3 will allow MRCB to secure more contracts from LRT3 in the future, which will boost its current order book of RM1.7 billion.

"Additionally, the PDP roles will easily add RM54 million per year to the group's bottom line, assuming a clean 6% PDP fee from Prasarana," said Kenanga. 

HLIB Research said Sunway Construction Group Bhd and Mitrajaya Holdings Bhd may emerge as strong contenders for LRT3 work packages.