KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) research has cut earnings' forecast for financial year 2023 for Malaysian Resources Corporation Bhd's (MRCB) on higher taxes, after third quarter ended Sep 30, 2023 (3Q23) earnings came in below expectations from higher-than-expected effective tax rate.
It cut the group's FY23, FY24, FY25 earnings forecasts by 32.5 per cent, 16.1 per cent and 16.5 per cent respectively, after adjusting for tax rate assumptions.
MRCB's 3Q23 results came in below its and consensus expectations at 42.9 per cent and 44 per cent of full year forecasts respectively.
MRCB reported 3Q23 results with revenue of RM503.7 million and core profit after taxation and minority interests (Patami) of RM1.5 million.
This brought 9MFY23 core Patami to RM20.8 million, decreasing by 38.1 per cent.
The investment bank said deviations to its forecast came from higher than expected effective tax rate as the nine months period ended Sept 30, 2023 (9MFY23) profit before tax came in above expectations at 82 per cent of forecasts.
HLIB research has maintained a "Buy" call on MRCB with marginally lower target price of RM0.54.
"Looking ahead, MRCB's 4Q23 headline will likely be boosted by disposal gain of approximately RM52 million," it said in a note.
Meanwhile, in the near term, HLIB research expects the revived scopes of the LRT3 (Phase 2) to be finalised in early 2024, potentially adding more than RM1.5 billion to MRCB's active order book.
"Phase 2 is expected to be up and running by the second quarter of calendar year 2027 (2QCY27), which could mean that works should start in the first half of 2024 (1H24). "LRT3 aside, there are two jobs in the pipeline, being Shah Alam Stadium redevelopment, which is valued at over RM1 billion and KL Sentral redevelopment, also exceeding RM1 billion." "The stadium job will start in 2024, broken up into multiple phases to ease land monetisation.
"As for KL Sentral, works could start in 2025 once terms are finalised. MRCB's has RM30 billion worth of outstanding tenders with notable projects being MRT3 and water infra (RM1 billion)," it added.
Meanwhile, HLIB research said MRCB has launches worth RM4 billion planned for financial year 2024 (FY24) having launched RM1.6 billion for FY23. It noted that the group's 10M23 sales of RM512.7 million have exceeded its expectations with a remaining RM240 million to be converted to sales and purchase agreement (SPAs).
"Sales contribution from VISTA is expected to kick in stronger going forward with a gross development value of RM1.17 billion. "MRCB is actively managing its landbank for further monetisation, which comprises 466.6 hectares with a GDV of RM33 billion," it said.
Going forward, it said MRCB benefits from better project pipeline visibility and value unlocking initiatives.