Analysts remain positive on MRCB (1651)

GOOD EARNINGS VISIBILITY: Company is poised to win a few major construction jobs in the second half of the year


ANALYSTS remain positive on Malaysian Resources Corp Bhd (MRCB) stocks as it is poised to win a few major construction jobs in the second half this year, giving the company a good near-term earnings visibility.

Analysts like MRCB for several reasons, which include that the group is likely to be a beneficiary of the long-awaited Rubber Research Institute and redevelopment project.

The company, which is 42 per cent owned by the Employees Provident Fund, is seen as one of the favourites to secure a job under the My Rapid Transit (MRT) project. So far, it is one of the several companies that has yet to secure any jobs for the MRT project.

MRCB is one of the 11 companies pre-qualified for the viaduct packages. The company is also rumoured to be one of the front runners to develop a prime 8.09ha site on Jalan Bangsar, where the Unilever headquarters and factory once sat.

"This news should spice up its re-rating 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," said CIMB in a report in late June when the report, citing sources, was published.

Its stocks have seen a strong buying support since it fell to its year low of RM1.55 a share in early June. Over the past five weeks, MRCB stocks have gained over 20 per cent, with an average trading volume of 5.7 million shares a day.

RHB Research, in its report last month, added that MRCB's near-term earnings visibility is good, on the back of strong construction and property profits.

"Construction profits will be underpinned by successful variation order claims that are likely to be reflected in the coming quarterly results and at least RM1 billion worth of new construction jobs that are 'within reach' this year.

"The new jobs may come from, among others, its share of works from the RM1 billion extension project for Duta-Ulu Kelang (DUKE) Expressway (MRCB owns a 30 per cent stake in DUKE Expressway).

"MRCB also spoke about the possibility of securing a sizeable government job. The RM1 billion new construction order book expectations actually exclude potential Klang Valley MRT work packages," RHB Research said in the report.

Based on Bloomberg data, there are nine research houses that are optimistic on the stock, while two analysts advised investors to hold on to the stocks and a research house recommended investors to sell.

Analysts placed a target price of as high as RM3.10 on MRCB.