MGB achieved exemplary core net profit of +>300% YoY despite recording a meagre drop of -0.6% QoQ due to lower contribution from its associates. The Group recorded improvement across all business divisions especially within its property division, contribution from this division jumped >100% QoQ boosted by stronger QoQ sales mainly from its Rumah Idaman affordable housing projects. Nonetheless, 3QFY23 core net profit beaten ours and consensus expectations, accounting for 83% and 83.2% of the full year estimates. Thus, we raise our earnings forecast by 3.6% on average per annum over FY23-25F to reflect higher progress billings. We retain our Outperform call with a revised SOTP derived TP of RM1.16 (previously RM1.15) pegged at 8x PER, below 15x PER sector average, given MGB’s smaller outfit.

• Revenue enhanced 10.1% QoQ. Revenue contribution from the construction division rose 3.5% QoQ owing to higher progress billings from its Idaman BSP, Kita Mekar and Kita Mesra projects. In addition, the property division outperformed its core division during the quarter, marking >100% QoQ improvement due to higher property sales mainly from Idaman Sari and Idaman Cahaya which recorded 72.5% and 57.6% take-ups respectively.

• PBT declined by a meagre 0.5% QoQ. We noticed construction pre-tax margin has deteriorated by 14% QoQ, which we understand is due to higher raw material prices especially ready mixed concrete which recorded +6% hike in prices from the previous quarter, coupled with higher finance cost (+15.7% QoQ). Apart from that, the quarter also recorded a lower profit contribution (-46.1% QoQ) from its associates.

• Outlook. To recap, MGB’s YTD job replenishment stood at 40.2% of our FY23 orderbook replenishment assumption of RM500m. Though there has been a slight lag in terms of job replenishment, we anticipate 1-2 jobs win worth approximately RM300m in total by late-FY23. On its Saudi Arabia venture, we are anticipating its first contract award by 1QFY24, current progress on the factory upgrading stood at 45%. Within its property division, there will be an upcoming launch in 2QFY24 situated at Cameron Highland, Pahang with a GDV of RM107m.

Source: PublicInvest Research - 21 Nov 2023