Malaysia's MRCB lower on speculation to buy stake in Equine

STOCKWATCH - Malaysia's MRCB lower on speculation to buy stake in Equine
11/06/2007 11:11:00
KUALA LUMPUR (XFN-ASIA) - Malaysian Resources Corp Bhd (MRCB) shares were
lower, bucking the trend in the broader market, on speculation that it will buy
a stake in Equine Capital Bhd, a move that analysts said will add very little to
MRCB's shareholders value.
At 11.09 am, MRCB was down 0.01 rgt or 0.40 pct at 2.50, while Equine was flat
at 3.06 rgt.
The KLCI was up 12.18 points or 0.90 pct at 1,364.57
There is speculation that MRCB will acquire a stake in Equine to participate in
the building of a new airport in Penang.
OSK Research said there is no sense in acquiring a stake in Equine Capital as
it will not add to MRCB's shareholders value as Equine is primarily engaged in
property development and the provision of recreational and equestrian
activities, which is "relatively trivial compared to MRCB's construction job
profile".
In addition, Equine reported a 79 pct drop in net profit to 3.56 mln rgt for
the year to March 2007 on the back of a turnover of 76.5 mln rgt.
"We would be disappointed if MRCB (takes) an equity stake in Equine," OSK
analyst Tursina Yaacob said.
"(However,) we would be comfortable in MRCB's participation in the project
since construction of the new airport in Batu Kawan will add 1.2 bln rgt to the
company's orderbook, bringing total outstanding work to 3 bln rgt," she said.
In addition, the construction of an airport will enhance MRCB's job profile,
increasing its ability to bid for a wider range of projects.
"Assuming a conservative 8 pct margin, the project would add 96 mln rgt to
MRCB's bottomline," she said, but added that she is maintaining her earnings
projections for MRCB until there is confirmation of the acquisition.
OSK has a 'trading buy' recommendation on MRCB, with a 12-month target price of
3.25 rgt.


Source: Osk WireNews