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Friday, September 29, 2017

MRCB: Cheap Enough?

MRCB is an integrated transport hub developer. Since the successful completion of its KL Sentral CBD development, it has expanded its projects to include PJ Sentral, Kwasa Damansara & Penang Sentral. For more on its projects, go to here

To finance its mega projects, MRCB has proposed a 1-for-1 Rights Issue at 79 sen which comes with 1 free warrant for every 5 shares subscribed for. The exercise price for each warrant is fixed at RM1.25. For details of the fixing of the Rights Issue & warrant exercise price, go here. The Rights issue has prompted a sharp drop in MRCB share price from RM1.75 in May to as little as RM1.01 on Sep 26 & 27.

Kenanga has maintained a fairly positive view on MRCB, valuing MRCB at RM1.14 after the Rights issue. Assuming that MRCB closed at RM1.03 today (the last cum date), the theoretical ex-Rights price is about RM0.97. This gives MRCB an upside of about 17%. I feel that Kenanga's fair value is too conservative, probably due to market reality.

Based on the sharp drop in share price over the past 4 months, I believe MRCB is a good stock for long-term investment. You can either buy MRCB today and then go through with the Rights issue or buy it after the Rights issue when further "massaging" may throw out even lower prices. Good luck!


Chart 1: MRCB's daily chart as at Sep 28, 2017 (Source: Shareinvestor.com)


Chart 2: MRCB's monthly chart as at Sep 28, 2017 (Source: Shareinvestor.com)

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

3 comments:

martinkakashi said...

Sendai has been dropping significantly recently... What is your take on such pricing now? Thanks.

Alex Lu said...

Hi martinkakashi

Sendai had a tough time in FY2016. It did a massive kitchen-sinking exercise which resulted in a net loss of RM258 million for FY2016. It made several provisions in QE31/12/2016, including provision for diminution in fair value of financial assets of RM101.7 million, unrealized foreign exchange loss of RM15.5 million, provision for doubtful debts of RM63.9 million and the higher costs resulting from delays in project funding and low utilization of fabrication factory in the Oil and Gas segment (amount not stated). After an exercise of such magnitude, we can expect the company to be profitable for the next few quarters. The comment on the group's prospect was fairly positive. To wit: "With the current order book in hand, the Group is confident to achieve higher revenue and profitability going forward."

Chartwise, Sendai is now at its long-term uptrend line support at RM0.80. The immediate support below the uptrend line is the horizontal line at RM0.75. Any rebound will be capped by the overhead horizontal line at RM0.85.

Based on the above, I think Sendai should be rated as a HOLD.

martinkakashi said...

Hi Alex Lu,

Great sharing. Thanks.