• Still BUY, new MYR1.16 TP from MYR1.13 (SOP), 45% upside and c.3% FY25F yield. We expect 1Q24 core profit to rise 18-28% YoY (+5-12% QoQ), potentially reaching MYR14-15m (1Q23 core profit: MYR11.8m). This is amidst higher progress billings from jobs, particularly coupled with conducive labour conditions and manageable raw material prices. Looking ahead, we envisage better progress for existing jobs at the KITA@Cybersouth and Idaman projects to drive FY24 earnings growth.

• We estimate MGB’s latest outstanding orderbook at c.MYR1.2bn (taking into account the latest job win worth MYR207m vs our FY24F job replenishment of MYR500m) for D’Island Residence in March, which translates into earnings visibility over the next two years. Parent LBS Bina (LBS MK, BUY, TP: MYR0.82) plans to launch 10 projects with a total GDV of MYR2.3bn in FY24. The latter’s landbank of c.2,767 acres should also provide upcoming construction opportunities for MGB in the long run.

• Update on first overseas pre-cast order win. The group – via a JV between MGB International for Industry and SANY Alameriah Industrial (SA) – clinched its first order in Saudi Arabia worth SAR94.5m (MYR119.5m) in February via an order from SA and SALD Industrial to supply c.60k cu m of precast concrete products for 400 units of villas – this is for the Al-Arous development by ROSHN in North Jeddah. We understand that MGB is in the midst of finalising the precast sample and supply of precast elements – this may take place in June or July.

• The Selangor State Government aims to build >200k Rumah Selangorku homes by 2028. Chief Minister Dato’ Seri Haji Amirudin Shari said the target had been increased following the successful building of 45,000 units by his government since 2018. Dato’ Seri Haji Amirudin said his administration had approved >140,000 affordable units (under MYR250k) to date. As such, we do not discount the possibility of MGB clinching more affordable home projects in Selangor, with c.7.2k units currently under its purview.

• We take the opportunity to dial down on our FY24F-26F earnings by 4-7% to be more conservative on the Kerteh Terengganu Industrial Park’s progress. Notwithstanding this, we also roll forward our valuation base to FY25F from FY24F, which results in a slightly higher SOP-derived MYR1.16 TP. This TP bakes in a 0% ESG premium/discount, given its 3.0 ESG score.

• Valuation. With MGB’s precast venture in Saudi Arabia taking off, in addition to the possibility of the group scoring more affordable housing jobs in Selangor, we view its valuations as undemanding, given that its 7.6x FY25F P/E is -1SD below the 5-year mean. Catalysts include developing new property projects in Johor, as MGB already has two projects there – Laman Bayu (Batu Pahat) and Pangsapuri Saujana Indah (c.15km from Johor Bahru’s customs, immigration, & quarantine complex). Key risks to our call include slower property launches and sluggish precast purchase orders.

Source: RHB Research - 14 May 2024