MRCB on track to pare down net debt by about RM1b

by **Cals** Mon 14 Apr 2014, 17:38

Business & Markets 2014

Written by AmResearch

Monday, 14 April 2014 10:12

Malaysian Resources Corp Bhd
(April 11, RM1.62)
Maintain buy with target price of RM2.20: MRCB announced that it has entered into a conditional sale and purchase agreement for the disposal of Platinum Sentral to Quill Capita Trust (QCT) for RM750 million. The acquisition will be satisfied via RM486 million in cash, and 206 million new units in QCT for RM264 million at RM1.28 per unit.

The building’s office space (about 450,000 net lettable area [NLA]), located within MRCB’s prime KL Sentral integrated development, is fully tenanted. The retail portion is about 77% occupied.

Concurrently, MRCB also signed share sale agreements with CapitaLand RECEM Pte Ltd (CRPL) and Coast Capital Sdn Bhd (CCSB) to acquire 40% and 1% of their respective interests in Quill Capital Management (QCM), the management company of QCT for RM6 million. We understand that MRCB will utilise RM380 million from the proceeds of RM486 million to pare down some of its debts.

With a 31% stake in QCT after the asset injection, we understand that MRCB will receive approximately RM14 million in dividend income for financial year 2015 ending December 2015 (FY15F).

QCT — which will also apply for a name change to MRCB-Quill REIT — will see its asset base double to RM1.6 billion. We make no changes to our earnings recommendation for now pending finalisation of the two deals, which is set to be completed by the third quarter (3Q) of FY14. More importantly, the deals with QCT could herald the start of more injections of MRCB’s prime commercial assets in KL Sentral into QCT.

Together with the proposed sale of its 30% stake in Duke Highway for RM228 million, we believe MRCB could be on track to pare down its net debt by approximately RM1 billion in the coming months. This puts MRCB on a solid platform to transform into a property-centric group with a stronger balance sheet.

We maintain our “buy” recommendation on MRCB with an unchanged target price of RM2.20 per share. This pegs the stock at a 20% discount to its revised net asset value (RNAV). — AmResearch, April 11, 2014

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This article first appeared in The Edge Financial Daily, on April 14, 2014.