Momentum shifts in MRCB’s favour

ONCE a prominent figure in Malaysia’s urban development landscape, Malaysian Resources Corp Bhd’s (MRCB) earnings and share price have experienced fluctuations, which have not been particularly positive.

Last year, the construction and property developer saw its earnings come under pressure, resulting in lower revenue and profit for financial year 2024 (FY24) compared to the previous year.

To recap, MRCB’s FY24 revenue fell by 35% to RM1.65bil and its profit before tax dropped by 44% to RM75mil compared to the prior year.

Net profit for 2024 was RM63.67mil, down 37% from RM101.03mil in 2023.

On a quarterly basis, for the period ended Dec 31, 2024, its net profit plummeted 99.2% to RM629,000, compared to RM80.23mil recorded in the same quarter a year ago.

Quarterly revenue shrank by 46.4% to RM370.72mil.

Amid a challenging outlook, MRCB unexpectedly returned to the spotlight with a series of contract wins early in the year.

In February, the group had announced that its wholly-owned subsidiary, Setia Utama LRT 3 Sdn Bhd, had won a reinstatement works contract from Prasarana Malaysia Bhd worth RM2.47bil.

More recently, it bagged a RM2.94bil contract to develop the Shah Alam Sports Complex (KSSA) through another of its wholly-owned subsidiaries, Lembaran Prospek Sdn Bhd.

Both wins have boosted MRCB’s order book to RM5.4bil – exceeding many analysts’ earlier assumptions for the year, which ranged from RM4bil to RM5bil.

Could this be the turning point MRCB was hoping for in 2025?

According to MIDF Research, the group is emerging from a transitional period with a rejuvenated pipeline of large-scale projects that provide strong multi- year earnings visibility.

The potential for MRCB to recover from last year’s losses is evident.

“Its construction order book, which stood at RM26.1bil as at Dec 31, 2024, has expanded meaningfully with calendar year 2025 (CY25) (contract) wins.

“Coupled with a landbank gross development value (GDV) of RM37.8bil and strategic property developments on the horizon, the group offers solid long-term value,” the research house says in a reply to StarBiz 7.

While near-term profitability may remain modest, the convergence of infrastructure and urban regeneration projects, government partnerships and property development reinforces a constructive outlook for MRCB, MIDF Research adds.

The research house has maintained its “buy” call with a target price (TP) of 56 sen per share, pegged to a 10% discounted seven-year forward price-to-book ratio of 0.53 times, based on the group’s estimated FY27 forecast book value per share of of RM1.05.

“The key EPS (earnings per share) growth drivers lie in the group’s expanding construction order book, which has grown substantially in CY25 with over RM6bil worth of new contract wins across four large projects: KSSA, Hospital Putra in Melaka, Ipoh Sentral transit-oriented development (TOD), and LRT3 reinstatement,” MIDF Research explains.

Could these projects offer enough upside to support sustained earnings growth over the coming years?

MIDF Research believes so.

“The strategic structuring of these projects – phased timelines, deferred land payments, and engineering, procurement, construction, and commissioning- based cash flow management – mitigates financial stress,” it says.

If project delays were previously a key growth impediment, then perhaps MRCB can breathe a little easier this year, as management expects these issues to ease. That said, despite the recent project wins, the group’s share price continues to influence shareholder sentiment.

Historically, MRCB’s share price peaked at RM2.635 on July 26, 2007, and hit an all-time low of 28 sen on March 19, 2020 – during the early stages of the Covid-19 pandemic.

Since then, it has fluctuated between 49.5 sen and 73 sen.

While its share price has yet to reflect the optimism surrounding its recent contact wins, can the group restore investor confidence?

According to MIDF Research, restoring shareholder value will require a combination of sustained earnings delivery, consistent replenishment of its order book, and effective monetisation of its RM37.8bil GDV landbank.

“The group must ensure the timely execution of its newly secured projects, especially the long-term Ipoh Sentral TOD valued at RM6.26bil in GDV, and Bukit Jalil Sentral TOD valued at RM11.0b, with clear visibility of earnings recognition going forward,” it says.

To further boost investor confidence, the group could also introduce a clearer dividend policy, form strategic partnerships for key land parcels, and strengthen its focus on unlocking recurring income streams.

“This could be injecting completed assets into a real estate investment trust, which would enhance long-term investor confidence and support a rerating of its valuation,” the research house says.

MIDF Research isn’t the only firm expressing confidence in MRCB – other analysts have echoed similar sentiments.

RHB Investment Bank Bhd (RHB IB) has upgraded MRCB’s TP to 80 sen apiece from 76 sen previously, stating that the group’s unbilled construction order book – post-KSSA – will amount to approximately RM8.9bil, providing earnings visibility for the next four years.

Execution risk for the KSSA project is likely to be manageable, as MRCB had previously secured a RM1.6bil bid back in October 2015 to regenerate the Bukit Jalil National Sports Complex into KL Sports City – highlighting its relevant experience.

This track record contributes to the upside in RHB IB’s revised target price. Accordingly, the research house has revised its FY25 job replenishment assumption to RM6.5bil.

As confidence builds, shareholder sentiment is likely to follow, potentially lifting the stock from its currently subdued levels. While challenges remain, the groundwork laid by these recent wins offers a compelling narrative of recovery and growth.

For investors who have been waiting on the sidelines, MRCB’s latest developments could represent the early stages of a broader re-rating.

Momentum, it seems, is finally beginning to shift in the group’s favour.