Malaysian Resources Corporation Berhad (MRCB) has demonstrated a remarkable turnaround in its financial performance, despite facing a significant revenue dip in the second quarter of FY24. The company's revenue fell by 37.9% year-on-year to RM372.2 million, yet its core earnings surged 4.7 times to RM51.2 million, surpassing expectations. This substantial growth in core earnings was driven primarily by the robust performance of the construction segment, notably from the LRT3 and Muara Sungai Pahang Phase 3 flood mitigation projects.
In light of these developments, several analysts have adjusted their recommendations for MRCB. MIDF Stock Broking House has upgraded its rating for MRCB from NEUTRAL to BUY, maintaining a target price (TP) of RM0.67, reflecting an expected return of 21.8%. Similarly, Kenanga Stock Broking House has revised its outlook, raising its TP to RM0.62 from RM0.34, and upgrading the stock from MARKET PERFORM to OUTPERFORM. The firm anticipates MRCB's order book replenishment, supported by a tender book valued at RM34 billion, to bolster its future earnings. RHB Stock Broking House has also maintained a BUY recommendation, increasing its TP to RM0.86, underscoring a 56% potential upside.
MRCB's order book remains impressive, with an outstanding RM4.7 billion, excluding the long-term Bukit Jalil Sentral TOD project. The company has been active in securing new contracts, with a current tender book encompassing major projects like MRT3, the expansion of Penang International Airport, and several flood mitigation initiatives. Despite a slower pace in order book replenishment compared to its target of RM5 billion for FY24, MRCB is expected to make up the shortfall with ongoing negotiations for key projects, including additional LRT3 stations and significant redevelopment projects.
On the property development front, MRCB experienced a dip in revenue, down 29.8% year-on-year to RM71.3 million, attributed to delays in property sales and strata title issuances. However, the company anticipates recognising pending sales in late 3QFY24 or early 4QFY24, which could improve its performance in the latter part of the year.
