CIMB keeps MRCB a trading buy, ups FV to RM2.02 (1651)

by **hlk** Mon 25 Jun 2012, 13:57

KUALA LUMPUR: CIMB Equities Research has raised the fair value for Malaysian Resources Corp Bhd (MRCB) from RM1.90 to RM2.02 on a report it is the frontrunner for a prime piece of land in Bangsar.
It
said on Monday its target price, which remains pegged to 30% RNAV
discount, was raised due to a lower risk premium assumption for the
Eastern Dispersal Link Expressway (EDL).
"We estimate that the
acquisition would enhance RNAV by 5-6% and EPS by 12-18% from FY14
onwards. MRCB remains a Trading Buy and not an Outperform due to the
political overhang on the sector," it said.
It was commenting on
a local news report that MRCB has emerged as the frontrunner to develop
a prime 8.1ha (900,000 sq ft) site on Jalan Bangsar, which is the
former headquarters/factory of Unilever. The land is owned by Pelaburan
Hartanah Bumiputera (PHB).
The project was expected to be worth
over RM5bil in gross development value but it was not clear if MRCB
would acquire the land outright or develop it through a joint venture.
If
the land was converted to commercial use, it could fetch about RM600
psf. Before conversion, it could be worth RM400 psf to RM450 psf, which
is not far from SP Setia's
RM400 psf cost for its 10.1ha land near the Unilever site. SP Setia's
land is said to be worth RM600 psf. Other candidates shortlisted for
the land are SP Setia and Mah Sing
CIMB Research said the site would take 10 to 15 years to be fully developed.
"Assuming
a 20% pretax margin, we estimate a potential EPS enhancement of 12%-18%
starting in FY14. Based on the land cost of RM400 to RM450 psf and the
current value of RM600 psf, our RNAV and target price would increase by
5% to 6%," it said. The research house said investors should accumulate
MRCB. It said this news should spice up its rerating catalysts which
include the EDL recovery story (approval of toll compensation) and
potential progress of Rubber Research Institute land in the second half
of 2012, leading to construction and property development
opportunities.