Malaysian Resources Corp’s New Shah Alam Stadium On Track, Says RHB IB

Findings from RHB Research’s ground checks at the public display of the new Shah Alam Sports Complex (which Malaysian Resources Corp is involved in) indicate that the progress of this project is on track. The research house gathered that the Selangor Government and MRC are gathering feedback via the public display prior to finalising the stadium’s design.

Meanwhile, the state government is obtaining the development permit from authorities, with construction likely to start sometime between February and April.

Details of the public display. Online feedback forms had questions regarding changes respondents want for the stadium – ie sustainable development, traffic and flood management. The capacity of the new Shah Alam stadium is planned to be at 35-45k spectators vs c.80k spectators previously. Despite the smaller capacity, it is believed this would result in better utilisation, as the redevelopment plans include recreational, commercial and residential parts (ie a sports-themed mall, hotel) together with a transit hub linked to the Light Rail Transit 3 (LRT3) station.

The new stadium features an ethylene tetrafluoroethylene (ETFE) ceramic coating for its roof and cool air circulation under seats which promotes thermal stability. There would also be a retractable football pitch facilitating easier transformation from sports to multipurpose mode for other events.

The research house also sighted the underground water storage system (UWSS) from the proposed layout. This is a crucial element as Section 13 of Shah Alam (the location of the Shah Alam stadium) is a flood-prone spot.

This UWSS feature was likely mooted back in 2015, when former Shah Alam mayor Datuk Ahmad Zaharin mentioned about utilising a portion of the Shah Alam stadium grounds to stop flash foods from occurring. The Shah Alam City Council, in Apr 2022, had allocated MYR150 million to upgrade drainage systems and retention ponds in the city over three years.

No changes to earnings forecasts pending further details on factors like, land to be swapped in exchange for MRC’s works on the complex and the job value to redevelop the complex, as MRC and the Selangor Government finalise the project details post public display. Initially, the cost was estimated to be MYR787 million – c.10% of its unbilled orderbook excluding the long-term Bukit Jalil Sentral job.

All in, the research house’s target price (TP) remains at MYR0.45 after ascribing a 0% ESG premium to MRC’s intrinsic value, based on its in-house proprietary scoring methodology.

The research house reiterated a BUY rating on MRC for diversifying its property arm into industrial properties, ie Ipoh Raya Integrated Park and new overseas markets – Australia and New Zealand (total GDV more than MYR1.5 billion).

An upcoming catalyst would be the potential re-instatement of omitted works for LRT3 worth c.MYR1 billion – partly mitigating risks from the Mass Rapid Transit 3 project. Valuations are undemanding as the stock is trading -1.5SD from its 5-year mean P/E.

Key downside risks include a prolonged slowdown in the property market and regulatory risks impacting project timeline rollouts and costs.

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