Malaysian Generations Builder (MGB) secured a job worth RM156.8m from its parent company, LBS Bina to build KITA Bestari, a new phase of KITA @ Cybersouth township. MGB’s scope of work involves the construction of 817 units of landed residentials, 4 units of electrical substations, a community centre and a guard house with a GDV of RM418m. Accounting this new job win, MGB’s outstanding orderbook stood at RM203.6m as-to-date, making up 40.2% of our current orderbook replenishment assumption of RM500m. Hence, we are leaving our forecasts unchanged for now. Nonetheless, the job is expected to contribute c. 6% per annum on average to the Group’s earnings during the estimated construction period of 4 years, assuming a high-single-digit margin. We maintain our Outperform call and SOTP derived TP of RM1.03 pegged at 8x PER, below 15x PER sector average, given MGB’s smaller outfit size.

• About KITA Bestari. The development consists of 3 property types, 413 units of single storey terraced house, 76 units of double storey house and 328 units of townhouse, located within KITA @ Cybersouth township at Sepang, Selangor. MGB is appointed as the main contractor to build KITA Bestari in 3 phases, with an estimated construction period of 4 years, commencing from 3QFY23.

• Healthy orderbook at RM1.85bn. The Group’s existing order book rose 9% to RM1.85bn including the new job win, providing earnings visibility for the next 3 years based on FY22’s construction revenue of RM586.7m. From our estimation, this job would contribute RM2.9m per annum on average, from FY23-FY27, in net profit based on certain levels of work completion each year, assuming a high single-digit profit margin. Accounting this new job win, MGB’s YTD orderbook replenishment reaches RM203.6m, making up 40.2% of our current orderbook replenishment assumption of RM500m. Therefore, we make no adjustment to our earnings estimates considering this as part of our FY23 orderbook replenishment assumption.

• Our view. We expect more job wins going into 2HFY23 from its parent company – LBS Bina has RM2.1bn worth of launches (in GDV) on the pipeline in FY23, not forgetting external jobs with focus on affordable housing. We opined that demand for affordable housing would remain upbeat despite the short-term challenges to the property market i.e.: higher borrowing costs and slower economic growth.

Source: PublicInvest Research - 20 Jun 2023