MGB reported a 3QFY24 net profit of RM16.5m (+30% yoy), taking 9MFY24 earnings to account for 84% and 82% of our and consensus full-year estimate, respectively. We deem this roughly in line with our expectations, as there were higher gains on PPE disposal in 3QFY24 (about RM2.8m), which is unlikely to recur in the coming quarter. We believe MGB is on track to achieve our earnings growth projection of 19% in FY24F, supported by stronger progress billing from Idaman Projects and a healthy construction order book. As such, no changes are made to our valuation forecast, and we maintain a BUY call on MGB with an unchanged SOP-derived of RM1.18 (14x PE for construction division, 40% discount to RNAV for property division)

Results Highlights

3QFY24 results in line. MGB's 3QFY24 net profit of RM16.5m (+30% yoy) brought 9MFY24 cumulative core earnings to RM47.4m (+26.9% yoy), representing 84% and 82% of our and consensus full-year forecasts, respectively. We deem this roughly in line with our expectations, as there were higher gains on PPE disposal in 3QFY24 (about RM2.8m), which is unlikely to recur in the coming quarter. MGB’s 3QFY24 revenue grew 12.9% yoy, underpinned by substantially higher revenue contributions from its property arm (+351.9% yoy). This is attributable to the increase in progress development for the ongoing projects like Idaman Melur, Idaman Cahaya Phase 1 & 2, Idaman Sari and Saujana Indah Phase 1 & 2. As such, this supported a 24.3% yoy increase in PBT to RM22.2m. Construction arm PBT declined sharply (-66.5% yoy), reflecting reduced contributions from near-completion projects like Project Kita @ CyberSouth.

Construction order book remains healthy. As at 3QFY24, MGB’s construction order book stood at RM1.2bn, representing a healthy cover of 1.4x of its construction division revenue. With YTD order book replenishment of RM396m, MGB is on track to achieve its annual replenishment target rate of RM400-600m. The company has recently inked 2 RM860m GDV JV agreements with Talam Transform Bhd and Kandis Permai S/B to undertake a mixed development and a residential project on 26 acres of land in Taman Bukit Serdang, Seri Kembangan whereby the construction work of these projects is expected to be awarded to its construction division.

Earnings forecast and valuation. No changes to our earnings forecasts. Our SOP derived TP remains unchanged at RM1.18, with the construction division valuation pegged to an unchanged target P/E of 14x to FY25F EPS, while the property division is valued at 40% discount to RNAV. We continue to like MGB for its focus on affordable housing and healthy construction order book, complemented by its expertise in IBS solutions.

Source: Mercury Research - 21 Nov 2024