KUALA LUMPUR: Hwang DBS Vickers Research is maintaining its Buy call on Malaysian Resources Corp Bhd (MRCB) and its sum-of-parts (SOP) derived target price of RM2.25.

The research house said on Wednesday, Aug 25 that MRCB’s 2Q10 net profit of RM12 million, (up 24% on-quarter and up 2% on-year) on the back of 8% decline in revenue to RM174 million was “broadly within our and consensus estimates”.

The highlight was the doubling of construction margins to 9.7% in 2Q10 vs 5.0% in 1Q10, due to ramp up of works for Eastern Dispersal Link, Permai Hospital, and on-going works at KL Sentral with higher economies of scale.

“We expect stronger earnings momentum in 2H10 buoyed by the ramped “S” curve construction progress at KL Sentral for Lots A, 348, E and G, and its RM0.9bn external orderbook,” it said.

Hwang DBS Vickers Research expects MRCB’s appointment as master developer of the Rubber Research Institute Malaysia (RRIM) land, coupled with its construction and developer role, to transform its fortunes considerably.

“It is also an indirect beneficiary of the RM43bn MRT project as there will be a key station on the RRIM land. Other potential catalysts are a surge in construction flows and possible participation in the Jalan Cochrane land, which we understand it is still pursuing,” it said.