• Keep BUY and SOP-derived MYR1.20 TP (56% upside), c.3% yield. MGB’s 9M24 core profit of MYR41.5m (+15% YoY) met expectations at 74% of our full-year estimates but broadly met Street’s at 71%. We expect MGB to chart a solid 16% earnings growth in FY24, backed by higher progress billings for its property sales projects, especially the Rumah Selangorku Idaman (Idaman) projects, spread over a total GDV of c.MYR1.3bn and c.3.8k units.

• 9M24 core profit was underpinned by the property development arm, which recorded >100% YoY PBT growth due to higher unit sales progress and progress development for Idaman Melur (99.1% sold), Idaman Cahaya (93.3% sold), Idaman Sari (98.8% sold) and Saujana Indah Phase 1 and 2 (>40% sold). As such, PBT margins for the segment remained strong at 15.7% in 9M24 (9M23: 16%). Meanwhile, the construction arm’s PBT saw an 80% YoY drop in 9M24 due to completed projects such as Kita Mekar and Alam Perdana Phase 4 and 5. The group also continued to incur some start-up costs at its precast arm in Saudi Arabia.

• Its outstanding orderbook of MYR1.2bn as of end 3Q24 (end 2Q24: MYR1.3bn) includes three jobs (cumulative contract value: c.MYR442m) related to LBS Bina’s (LBS MK, NEUTRAL, TP: MYR0.72) key township development, KITA@Cybersouth. We do not discount the possibility of MGB scoring further wins from the township, which has MYR3.5bn worth of unlaunched GDV (of the total MYR6.6bn) as of August. Other launches to look out for include LBS Alam Perdana, which has MYR1.3bn worth of unlaunched GDV from a total of MYR4.6bn.

• No changes to our earnings estimates, as earnings were within expectations. Our SOP-derived TP remains at MYR1.20, with the construction arm pegged to an unchanged target P/E of 12x (which we deem justified amidst upcoming expected launches by LBS, ie Alam Perdana and KITA@Cybersouth) and growth in Saudi Arabia’s housing sector. Our TP includes a 0% ESG premium/discount, as MGB’s ESG score is at the country median.

• Prospects. With MGB’s precast venture in Saudi Arabia gradually taking off, and the possibility of the group scoring more affordable housing jobs in Selangor beyond 10k units, we think valuations are undemanding as its FY25F P/E of 7x is -1SD below its 5-year mean. Catalysts include developing new property projects in Johor, as the group already has two projects in the state – Laman Bayu (Batu Pahat) and Pangsapuri Saujana Indah (15km from Johor Bahru’s custom, immigration and quarantine complex). A faster-thanexpected development of the Kertih Terengganu Industrial Park (estimated GDV: MYR747m) may serve further earnings upside.

• Key risks include an unexpected slowdown in the property market and slower-than-expected precast orders in Saudi Arabia.

Source: RHB Securities Research - 21 Nov 2024