MALAYSIAN Resources Corporation Berhad (MRCB) shares have been unfairly sold down due to investors’ perception that this counter is heavily linked to the government, with the Employees Provident Fund (EPF) having a 30% stake since 2005, said AmResearch.
The total foreign shareholdings in the company had also declined form the peak of 40% before the March 8 general election to 29% as of April 2008, it said.
The research house cited a news report that the Penang government might carry out its own monorail project and was considering a proposal submitted by the Melewar Group.
“With the new state government said to be seriously considering the proposal for the monorail system in Georgetown from their rival bidder’s RM2.2 billion ultra-light loop monorail system, there is a high chance that the project could be further delayed,” it said.
AmResearch has recommended a buy call on MRCB at RM1.51 with a target price of RM2.80.
Commenting on the bid submitted by the Melewar Group, the research house said the proposed ultra-light loop monorail system covering a 52km track was set to operate on a single line and run on three different loops from locations like Gelugor, Farlim in Air Itam and Gurney Drive into the city.
“In January this year, Syarikat Prasarana awarded a letter of intent (LOI) for the project to MRCB, which had formed a consortium with Penang Port Sdn Bhd and Scomi Engineering Bhd.
“MRCB had said earlier that the Penang monorail project would take at least six months to be finalised, as talks between Syarikat Prasarana and Penang state have yet to commence.”
AmResearch said it had already factored in a conservative assumption in its earnings forecast, taking into account that MRCB’s Penang projects could be delayed or even cancelled.
“The absence of the Penang monorail has already been taken into account in our earnings forecast. We have also deferred Phase 2 of the proposed integrated Penang Sentral project, which has an estimated gross development value of RM2 billion,” it said.
These two projects and the reappraisal of the company’s construction business value were the key factors that contributed to a 8% downgrade in their net asset value (NAV) per share to RM3.80, said the research house.
The research house forecast earnings per share and price earnings ratio of 9.1 sen and 16.6 times respectively for FY08, and 15.2 sen and 10 times respectively for FY09.
MRCB ended three sen higher to close at RM1.47 last Friday with about 9.48 million shares done.
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