KUALA LUMPUR (Feb 9): RHB Research Institute is maintaining a Trading Buy on Malaysian Resources Corporation Bhd.
It said on Thursday that the indicative fair value for MRCB is trimmed by 2% from RM2.46 to RM2.40 based on “sum of parts”.
“We have turned less enthusiastic on construction stocks as we believe their share price performance is likely to be muted over the next six to 12 months,” it said.
RHB Research said one reason was that the market begins to price in a higher risk premium for construction stocks ahead of the nation’s general elections that will have be held by March 2013.
“Even if the Klang Valley MRT project is to start work as scheduled, initial progress is likely to be painfully slow due to bureaucratic hurdles, which means realistically, earnings impact from the Klang Valley MRT may be a few quarters, or even a year or two away,” it said.
The research house also said there is generally a lack of credible new large-scale projects in the pipeline.
“For MRCB, however, there is a trading angle coming from the strong likelihood of it being offered a dual role, i.e. project manager and developer, by parent Employees Provident Fund (EPF) in the redevelopment of the 2,680-acre Rubber Research Institute (RRI) land in Sungai Buloh.
“Also, a 60:40 JV between Ekovest and MRCB is poised to bag the beautification portion worth RM1bn of the initial phase of the River of Life project. Indicative fair value for MRCB is trimmed by 2% from RM2.46 to RM2.40 based on ‘sum of parts’,” it said.
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