08 April 2015 | Corporate Update
Malaysia Resources Corporation Bhd
Acquiring German embassy land for RM259.2m
Maintain BUY
Unchanged Target Price (TP): RM2.24
INVESTMENT HIGHLIGHTS
•
MRCB has entered into a SPA with the Government of the
Federal Republic of Germany to acquire 1.9 acres of freehold
land for RM259.2m.
•
The proposed acquisition is expected to contribute positively
to the Group’s earnings in the long-term.
•
Earnings forecasts unchanged as potential development of the
proposed land acquisition is still at the preliminary stage.
•
RETURN STATS
Price (7 April 2015)
RM1.25
Target Price
RM2.24
Expected Share Price
Return
+79.2%
Expected Dividend Yield
+2.9%
Expected Total Return
+82.1%
Hence we maintain BUY with unchanged TP of RM2.24.
Land deal at 6% higher than appraised market value. MRCB has
entered into a sale and purchase agreement (SPA) with the Government
of the Federal Republic of Germany to acquire 1.9 acres of freehold land
together with buildings erected thereon located at Jalan Kia Peng (see
appendix) for a total cash consideration of RM259.2m. We understand
the proposed price of RM259.2m or RM3,188 psf is about 6% higher
than the appraised market value.
Our views. While the acquisition price that will be paid is at a slight
premium to the appraised market value, we deem the proposed price as
fair considering recent actual land transaction in the vicinity by E&O at a
price of RM3,250 psf. We opine that it is a strategic move by MRCB to
acquire the freehold land in the immediate proximity of KLCC where
lands are scare. The land to be acquired will raise its total undeveloped
landbanks to approximately 565 acres. It is premature to estimate the
GDV for the development project on the land at this time. The expansion
of its landbanks will be for its future developments.
Funding the acquisition via bank borrowings and/or internally
generated funds. The acquisition of the lands will be funded through
bank borrowings and/or internally generated funds. We expect the 10%
deposit of acquisition price to be paid by its internal funds of RM660.7m.
Post completion of the acquisition, the Group’s net gearing is expected
to be reduced to 1.4x this year from 1.5x in 2014 based on our
estimates. We see the land acquisition cost to be partially offset by the
proceeds from the injection of Platinum Sentral into REIT and its
proposed disposal of 70% stake in Salak South development.
STOCK INFO
FBMKLCI
1,856.51
Bursa / Bloomberg
1651 /
MRC MK
Board / Sector
Main / Property
Syariah Compliant
Yes
Issued Shares (mil)
1,786.6
Par Value (RM)
Market cap. (RM’m)
Price over NTA
1.00
2,233.2
1.28x
52-wk price Range
RM1.05–RM1.79
Beta (against KLCI)
1.19x
3-mth Avg Daily Vol
2.23m
3-mth Avg Daily Value
RM2.84m
Major Shareholders
EPF
35.93%
Gapurna Sdn Bhd
16.70%
Lembaga Tabung Haji
10.08%
Earnings forecasts unchanged. At this juncture, we make no changes
to our earnings forecasts as the proposed mixed development project on
the lands is still at a preliminary stage and will only have material impact
on its earnings in the longer term. We maintain our forecasts pending
the completion of its other corporate exercises.
KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES
MIDF EQUITY BEAT
Wednesday, 08 April 2015
INVESTMENT STATISTICS
FYE Dec
Revenue (RM’m)
EBIT (RM'm)
Pre-tax profit (RM’m)
Normalised PATAMI (RM’m)
FD EPS (sen)
EPS Growth (%)
PER(x)
Dividend (sen)
Dividend yield (%)
FY12
1,243.5
197.2
125.1
60.1
4.3
-35.7
35.7
2.0
1.3
FY13
940.9
9.0
-110.4
-109.1
-7.4
-270.0
n.a.
1.0
0.8
FY14
1,514.8
321.2
125.7
41.6
2.4
-133.0
50.2
2.5
2.0
FY15F
1,848.8
361.2
198.6
90.6
4.8
95.9
26.2
3.0
2.3
FY16F
2,224.1
389.7
229.1
115.6
6.1
27.6
20.5
3.6
2.9
Source: Company, forecasts by MIDFR
VALUATION AND RECOMMENDATION
Reiterate our BUY recommendation. We were surprised to see the current sell down of the stock. We believe that
this was due to property segment accounting approximately 60-70% of its PBT. It is notable that investor sentiment
has been more cautious towards the property sector in general. Having said that, we believe that the products of
MRCB is differentiated from the general property developers given that most of its properties are located in prime
locations and within immediate vicinity of transportation hub. Therefore, we expect its property sales to remain stable
going forward.
Also, MRCB-George Kent JV is primed to win the PDP role for RM10.0b LRT 3 and secure a slice of its construction
packages. Meanwhile, we are not overly concerned on its current gearing level as there will be possible monetisation
of other KL Sentral investment assets into REIT to pare down its gearing. Furthermore, the Group recorded a fast
turnaround in earnings last year from a kitchen sinking exercise undertaken in FY13. Hence, we retain our BUY call on
MRCB with an unchanged TP of RM2.24 per share. Our BUY recommendation is based on the high potential return
after the sell down of the stock.
DAILY PRICE CHART
Hafiz Hassan
[email protected]
03-2772 1668
Source: Bloomberg, MIDFR
2
MIDF EQUITY BEAT
Wednesday, 08 April 2015
SOP VALUATION
Segments
(a) Property Developments
KL Sentral Development
Project MX-1
PJ Sentral Garden City (Phase 1)
9 Seputeh, Old Klang
Penang Sentral
Kia Peng, The Grid
Kajang Utama, 3 Residences
Semarak City, Setapak
Lot 2C4: Putrajaya, Office Tower
Lot 349: Serviced Apartments
Suria Subang Jaya
Selborn 2 - Shah Alam
Batu Feringghi land, Penang
Salak South
Seri Iskandar (Phase 2)
Seri Iskandar (Phase 3)
Bukit Rahman Putra, Sungai Buloh
Burwood (Australia)
Sub-total (a)
Basis
DCF of future profit
(b) Property Investments
Net Operating Income + Book value
Indicative Value (RM'm)
Per Share (RM)
442.6
649.6
191.6
242.1
221.0
46.3
28.0
222.6
42.3
99.5
45.4
14.6
36.8
128.3
25.7
21.8
58.6
22.7
2,539.4
0.23
0.34
0.10
0.13
0.12
0.02
0.01
0.12
0.02
0.05
0.02
0.01
0.02
0.07
0.01
0.01
0.03
0.01
1.34
1,567.4
0.82
(c) Engineering & Construction
FY15/16 average earnings
PER 14x
520.5
0.27
(d) Toll Concessions
Eastern Dispersal Link, JB (EDL)
DCF (WACC: 8%)
1,399.1
0.74
PER 6x
38.9
0.02
Total SOP
6,065.2
3.19
Less:
Borrowings
-3,211.6
-1.69
660.7
240.0
502.4
0.35
0.13
0.26
(e) Building & Car Park Services
FY15/16 average earnings
Add:
Cash
Gain on Platinum Sentral
Quill Capita Trust: Combined REIT assets valued at RM1.57b
Estimated SOP
Enlarged share cap
2.24
1,900.4
Source: Forecasts by MIDFR
3
MIDF EQUITY BEAT
Wednesday, 08 April 2015
APPENDIX
CHART 1: PROPOSED LAND ACQUISITION
Source: Wikimapia, MIDFR
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MIDF EQUITY BEAT
Wednesday, 08 April 2015
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).
(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
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MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY
TRADING BUY
NEUTRAL
SELL
TRADING SELL
Total return is expected to be >15% over the next 12 months.
Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been
assigned due to positive newsflow.
Total return is expected to be between -15% and +15% over the next 12 months.
Total return is expected, by -15% or more, over the next 12 months.
Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been
assigned due to negative newsflow.
SECTOR RECOMMENDATIONS
POSITIVE
The sector is expected to outperform the overall market over the next 12 months.
NEUTRAL
The sector is to perform in line with the overall market over the next 12 months.
NEGATIVE
The sector is expected to underperform the overall market over the next 12 months.
5