• MCT’s 3Q18 core earnings more than doubled over yoy and qoq to RM12.7m on higher completion of tail-end projects. Overall, 9M18 core earnings of RM29.6m (-35% yoy) were inline at 73%.

• MCT remains positive for a market upswing; it plans to launch several new projects in upcoming quarters while actively seeking opportunities to expand its landbank.

• We upgrade MCT to HOLD (from TRADING SELL), following recent share price correction, with an unchanged RM0.81 TP. We believe the huge unbilled sales would provide some earnings relief despite the soft property market outlook and projects coming to a tail-end.

Core profits boosted by tail-end completions

MCT’s 3Q18 headline net profit more than doubled yoy to RM30.8m mainly boosted by gains from asset disposal. Recall that in Jan 2018 MCT divested its wholly-owned subsidiary One City Properties to net a gain of RM17.9m. Excluding this one-off item, core profit grew to RM12.7m. Overall, 9MFY18 core earnings were lower 35% yoy at RM29.6m and inline with our estimate at 73%.

Earnings recovery gaining pace

On quarterly basis, revenue recovered significantly to RM126.3m from RM64.2m as it focused to complete the construction of tail-end projects such as Cybersouth Green Casa and Casa View. Despite no new launches in the quarter, unbilled sales at end 3QFY18 were healthy at RM1.5bn mainly due to new sales from Lakefront Residence project. The ongoing projects also include Belleveu@Cybersouth (Phase 1c) and Lakefront PRIMA. With such huge unbilled sales amount, we believe these projects could provide earnings visibilities for the next 2-3 years.

New projects in the pipeline

Management guided that MCT would launch Casawood@Cybersouth in 4QFY18 followed by Casa Din’ari@Cybersouth. Recall that it acquired a 9.12 acre of land in Tropicana Metropark in Apr 2018. MCT targets to launch the first phase of development in 2019.

Valuation and recommendation.

MCT share price has since corrected after we downgrade to TRADING SELL (refer MCT (Mids Cap): Still weak - 20080301 - 2QFY18 - Result Review). Going forward, we believe its huge unbilled sales could provide some relief to earnings. Upgrade to HOLD with an unchanged TP of RM0.81.

Source: BIMB Securities Research - 14 May 2018