Kenanga upgrades MRCB TP to RM2.33 after land buy in Sungai Buloh

by **Cals** Tue 15 Apr 2014, 11:47

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Tuesday, 15 April 2014 11:10

KUALA LUMPUR (Apr 15): Kenanga Research has upgraded its target price for Malaysian Resources Corporation Bhd (MRCB) to RM2.33 from RM2.02 after the firm acquired three parcels of land in Bukit Rahman Putra, Sungai Buloh.

However, the research house maintained an ‘outperform’ call on the stock at RM1.65.

Yesterday, MRCB announced it acquired the land for a total cash consideration of RM83 million from Bisraya Acres Sdn Bhd, a wholly-owned subsidiary of Gapurna Sdn Bhd.

In a note today, the Kenanga team said it considered the land cost as ‘fair’ as it represents 15% of its estimated gross development value of RM559.1 million, which is within the industry average ratio of 15% to 20%.

It said: “We note that the acquisition of the three parcels of land will inch up MRCB’s net gearing to 1.49 times from 1.45 times.”

“Nevertheless, we do expect its net gearing level to come down to 1.27 times as MRCB pares down its debt post disposal of Platinum Mall.”

The research team said it made no changes to its earnings forecast.

“We only expect meaningful earnings contribution to kick in late FY15 as the construction works for the residential development are only expected to commence in 1Q FY15,” the research team added.

Kenanga said two parcels of land were intended for residential development purposes comprising 49 units of 2.5 storey terrace houses, 216 condominium units and 30 units of town villas.

As for the other parcel of land, it would see commercial development comprising commercial office/shops and service apartments.