MRCB acquisition seen positive; rating kept

by **Cals** Thu 26 Dec 2013, 09:35

Published: Wednesday December 25, 2013 MYT 12:00:00 AM
Updated: Wednesday December 25, 2013 MYT 8:16:42 AM
MRCB acquisition seen positive; rating kept
BY ANALYST REPORTS

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MALAYSIAN RESOURCES CORP BHD
By Hong Leong Investment Bank
Buy
Target price: RM2.06
Malaysian Resources Corp Bhd (MRCB) has entered into an agreement with Arch Angel DMC Sdn Bhd (AADMC) to acquire a 70% stake in Arch Angel Capital Sdn Bhd (AAC) for a total of RM34mil.
The deal is expected to be completed by December 2013.
Arch Angel Capital has entered into a sale and purchase agreement with Putrajaya Holdings for a piece of 1.84-acre freehold land known as Plot 2C4, Precinct 2, Putrajaya.
The acquisition has yet to be completed.

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We understand that the proposed development is for a 13-storey commercial building with a potential gross development value of RM300mil to RM400mil.
We are positive on the move to diversify away from relying too much on KL Sentral for development profits.
However, the deal will only be meaningful if the development can be monetised quickly.
We remain optimistic that the new management will be able to turna round MRCB’s operations.
Hence, we maintain our long term “buy” call on the company
MALAYSIA AIRPORTS HOLDINGS BHD
By Maybank Investment Bank Research
Hold
Target price: RM8.20

Malaysia Airports Holdings Bhd (MAHB) has entered into an agreement to purchase an additional 40% stake in Sabiha Gökçen airport from GMR Holdings for RM1.01bil at the current exchange rate.
This values the transaction at 15 times its financial year 2012 enterprise value per earnings before interest, taxes, depreciation and amortisation (EV/EBITDA)
which is a slight discount of 4.5% to MAHB’s current EV/EBITDA of 15.7 times.
MAHB will raise fresh equity of up to 10% of its current shares in issue to fund this transaction. We are positive on this deal as Sabiha Gökçen is a strategic asset with a bright outlook. We keep our earnings forecasts and RM8.20 discounted cash flow-based target price unchanged pending a management visit.
Our “hold” call is under review.
Sabiha Gökçen’s average interest rate of 8.61% is much higher than MAHB’s 4.3% and other European airports’ interest rate of 1.6%-2.8%. We think MAHB is in a good position to restructure this debt and lower the cost.
GLOBETRONICS TECHNOLOGY BHD
By Affin Investment Bank
Buy (maintained)
Target price: RM3.50

A quick check with management indicated that revenue would be slightly softer in the fourth quarter of 2013 (ending Dec 31) due to the seasonal slowdown.
However, in mitigation, volumes for its proximity sensors have picked up by 10% to 15% during the quarter.
With a higher revenue contribution from this better margin product, we think that our financial year 2013 core net profit forecast of RM50.3mil (+33% year-on-year) for Globetronics, is still within reach.
Epson, a key customer of Globetronics, is also transferring a new product for its Petaling Jaya operations with expected additional monthly volumes of around 20 million.
This is an estimated 18% increase in production volume for its timing devices and we understand that this will cater to the Chinese handset market. All in all, the above combined with increased volumes from OSRAM and its temperature compensation device product, would be the key earnings drivers, and thus contributing to the 29% earnings per share (EPS) growth that we have built in for 2014.
We think that this would also likely negate the impact from the electricity tariff increase from January 2014.
BUMI ARMADA BHD
By BIMB Securities Research
Non-rated
Target price: RM4.83

As expected, Bumi Armada announced the signing of the bareboat charter and operations and maintenance (O&M) contracts for the floating production, storage and offloading (FPSO) Kraken following the signing of the Letter of Interim Agreement in Novemer 2013.
The contracts are for a firm period of eight years years with annual extension option for further 17 years. Contracts for firm period are valued at US$1.4bil (RM4.62bil), which is at the top end of our previous estimate of US$1bil (RM3.3bil) to US$1.4bil.
Penetration into the harsh environment North Sea which has the global highest operating/safety requirements for offshore oil and gas activities is a very significant milestone for the company and also a testimony of its competitive strength within the global FPSO space.
Supported by its balance sheet and high level of offshore activities globally, the company is currently bidding for 11 other projects which include FPSO and floating storage regassification units (FSRU) (strong growth area with 30 projects in the pipeline globally).
Maintain our forecast and fair value at RM4.83.