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Monday, June 1, 2009

MRCB looks to property boost

Malaysian Resources Corp Bhd (MRCB), a builder and one of the country's biggest providers of office space, says its property development business will likely account for half of the group's revenue next year owing to a recent pick-up in projects.

At present, the group derives the bulk of its revenue from construction activities.

"We have nearly five million sq ft of space under development right now in terms of offices, retail and serviced apartments," group managing director Shahril Ridza Ridzuan told Business Times in an interview.

By year-end, the group would have launched at least four big commercial developments at a cost of over RM3 billion at Kuala Lumpur Sentral, the country's biggest transport hub.

Shahril said the group expects to return to profitability this year and chalk up higher revenues as building material prices have fallen significantly, allowing it enjoy better profit margins.

About 35 per cent of its revenue this year will likely come from the property business, with the rest contributed by construction, he said.

"But next year, the property recognition will probably be equal to the construction recognition. So, we'll go back to the same balance that we used to see before," he said.

The group, which registered a net loss of RM57 million last year, will probably make a net profit of RM6 million this year, OSK Research said in a report last week.

Shahril said shareholders can expect dividends this year. The company generally tends to pay out at least 20-30 per cent of its net profit.

The projects at Kuala Lumpur Sentral, some of which were delayed from late last year, are expected to reflect in its books from 2010 to 2012.

"Last year was a year when we did a lot of provisioning. But this year, I think we've turned a corner, and so, from 2010 to 2012, we'll start to see a lot of growth again in terms of revenue and profits," he remarked.

It has already started construction work on 348 Sentral, a RM1 billion office tower and serviced residence; "Lot G", a more than RM1 billion development comprising a new mall, hotel and two office towers; and the new headquarters of banking group CIMB.

It will also begin work on a RM500 million low-density campus-style development once it has managed to secure enough potential investors and tenants.

MRCB, the master developer of Kuala Lumpur Sentral, is likely to see its order book expand to about RM5 billion by the year-end from about 4 billion now, Shahril said.

Meanwhile, the group is looking to develop something similar to Kuala Lumpur Sentral, but on a smaller scale, in Vietnam.

Discussions are under way with potential partners there. "We're looking at urban integrated development," Shahril said.

Half of at least 12 analysts who track MRCB have a "buy" recommendation on the stock, according to Bloomberg data. Their target prices range from as low as 60 sen to as high as RM1.70.

MRCB last closed at RM1.32.

By Business Times (by Adeline Paul Raj)

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