MRCB: Operational Challenges Cloud Recent Performance, But Robust Order Book Signals Future Growth

Despite reporting a second-quarter performance below expectations, the company demonstrates strong future visibility underpinned by a robust order book and strategic growth initiatives. The 2QFY25 saw a dip in revenue, though management anticipates a significant rebound in the coming fiscal years.

Performance Review

For the second quarter of fiscal year 2025 (2QFY25), the company recorded a revenue of RM297.8 million, a decline of 20.0% year-on-year. Core earnings for the quarter fell significantly by 3.4 times year-on-year to RM15.1 million. This weaker performance extended into the first half of FY25, with core earnings declining 56.3% year-on-year to RM23.7 million, placing it below both internal and consensus full-year estimates. The shortfall was primarily attributed to softer contributions from both its property development & investment division and its engineering, construction & environment segments.

The engineering, construction, and environment segment remained the primary revenue driver, contributing 78% of group revenue in 2QFY25. However, revenue for this segment decreased by 12.1% year-on-year to RM248.2 million, and operating profit saw a substantial 6.1 times year-on-year drop to RM14.4 million. This was largely due to reduced contributions from projects nearing completion, such as the LRT3 project (99% physical and 98% financial progress), and flood mitigation projects (Muara Sg Pahang phase 3 and Sg Langat phase 2). Additionally, revenue recognition from newer secured contracts has been minimal as construction activities are still in their nascent stages.

Future Outlook and Strategic Initiatives

Looking ahead, management has provided guidance for an earnings rebound in FY26 and FY27. This positive outlook is supported by key projects, including the Kompleks Sukan Shah Alam project, the five reinstated LRT3 stations, and anticipated stronger property sales. The Group has also proactively strengthened its development pipeline with significant initiatives such as the RM6.25 billion GDV Ipoh Sentral mixed TOD, a RM520 million specialist hospital joint venture in Melaka, and the acquisition of RM287.7 million worth of Cyberjaya land parcels.

The company has successfully surpassed its FY25 project replenishment target of RM5.0 billion, having secured RM5.60 billion worth of projects year-to-date. This includes major undertakings like the RM2.50 billion for the five reinstated LRT3 stations and RM2.90 billion for the Kompleks Sukan Shah Alam. The current external construction order book stands at a healthy RM18.0 billion, with an unbilled order book of RM6.3 billion as of June 2025, providing strong revenue visibility. Management expects a ramp-up in the second half of FY25, driven by civil infrastructure jobs like the Penang LRT and Penang International Airport expansion, alongside new climate adaptation projects. The Group also continues to benefit from recurring income generated by its investment properties and a 27.9% stake in Sentral REIT. With a healthy net gearing of 0.34x and plans to monetise unsold completed units and extensive landbank (GDV of RM32.8 billion), the company is well-positioned for future growth despite the recent operational headwinds.