We remain upbeat on Malaysian Generations Builder’s (MGB) prospects, post meeting with the Management. Going into 2HFY23, we anticipate more job wins mainly from the Group’s parent company as well as external jobs with focus on high rise residentials. YTD new wins marked at RM203.6m as-to-date, making up 40.2% of our current orderbook replenishment assumption of RM500m. We gathered that the Group currently has about RM600m in construction tenderbook. That aside, we also see satisfactory property take-ups in its recent launches – Rumah Idaman and Taman Molek pocket development with an average take-up rate of 30%. Nevertheless, we are optimistic on the demand for affordable housing despite concerns on the soft property market. All told, we maintain our earnings forecast and retain our Outperform call with an unchanged SOTP derived TP of RM1.03 pegged at 8x PER, below 15x PER sector average, given MGB’s smaller outfit size.

• 1QFY23 results recap. Core PATAMI rose >50% YoY to RM12.2m, attributed to improvement across all business segments, especially in the construction division on the back of lower raw material prices and operational efficiency in the absence of MCOs.

• Tenderbook estimated at RM600m, comprising of ~4 active tenders, to our knowledge. We surmised that most of the jobs are mainly high rise residentials. The Group’s current orderbook stood at RM1.9bn, providing earnings visibility for the next 3 years based on FY22’s construction revenue of RM586.7m. MGB’s YTD orderbook replenishment reaches RM203.6m, making up 40.2% of our current orderbook replenishment assumption of RM500m.

• Satisfactory property take-ups. The Group has launched two projects – Idaman Melur in 4QFY22 and Idaman Cahaya (Plot 1 and 2) in 1QFY23 under Rumah Idaman, an affordable housing scheme with Selangor State Government. Take-ups for both of the launches has been encouraging so far. Idaman Melur and Idaman Cahaya has received take-ups of approximately 40% and 35%, respectively, in terms of confirmed sales. Following that, the Group has also launched their mid-range pocket development project, namely Pangsapuri Saujana Indah in Taman Molek, Johor in 1QFY23. As-to-date, the project has achieved approximately 10% confirmed sales take-up. Future launches include Idaman Sari in 3QFY23 and Cameron Highland, Pahang in 2QFY24 with a combined GDV of RM253m.

• More jobs in the pipeline. We anticipate more job wins in 2HFY23, mainly from its parent company as well as external jobs with focus on landed and high-rise residentials. Recall, LBS Bina has RM2.1bn worth of launches (in GDV) on the pipeline in FY23. Nevertheless, the demand for affordable housing remains upbeat despite concerns on the soft property market as end financiers have been supportive of lending to affordable home purchasers – we opined that the higher interest rate which leads to higher borrowing cost, would less seemingly discourage home shopping within the affordable segment as the jump in interest payment is more likely to impact mid-to-high end home purchasers due to loan quantum.

Source: PublicInvest Research - 26 Jul 2023