• MCT’s 4Q18 core earnings fell 45% yoy and 21% qoq to RM10m due to provision made on Skypark@Cyberjaya project. Overall, FY18 core earnings of RM39.6m (-13% yoy) were inline at 98%.

• MCT remains positive for a market upswing; it plans to launch several new projects in coming quarters while actively seeking new landbanks.

• Maintain HOLD with an unchanged RM0.81 TP (FY19F PE: 14.3x). In our view, its premium PE multiple over the sector’s 12x is justified by its huge unbilled sales and healthy balance sheet.

Core profits hit by provision for tail-end project

4Q18 core profits fell 45% yoy and 21% qoq to RM10m mainly due to provision for liquidated damages and rebate of RM12m and RM4m respectively for Skypark@Cyberjaya which was at the tail-end phases of completion. This is after excluding net gain from disposal of a subsidiary, Ecity Hotel S/B, for RM21.5m. Overall, FY18 core earnings declined 13% yoy to RM39.6m and was inline with our estimates at 98%.

Project progress gaining momentum

On qoq basis, revenue grew RM184.8m on steady construction progress at Lakefront@Putrajaya and projects such as Skypark@Cyberjaya and Cybersouth’s Green Casa and Casa View enters the final construction phase. As there was no new launch in the quarter, unbilled sales dipped slightly at end 3QFY18 to RM1.4bn from RM1.5bn that include projects such as Belleveu@Cybersouth (Phase 1c) and Lakefront PRIMA. Nonetheless, such huge unbilled sales still provide earnings visibilities for the next 2-3 years.

Low net gearing permits more landbanking exercise in future

Following the completion of the mandatory general offer made by Ayala Land, MCT has enhanced effort to acquire more landbanks. Recall that in Apr 2018 MCT acquired a 9.12 acre of land in Tropicana Metropark for RM143m. We expect more landbank acquisition in future given its low net gearing of only 0.05x.

Valuation and recommendation

Maintain HOLD with an unchanged TP of RM0.81. This implies 14.3x FY19 PE which is slightly above the sector’s 5-year historical average of 12.0x. We think the premium is justified by MCT’s: i) huge unbilled sales of RM1.4bn; ii) healthy balance sheet with 0.05x of net gearing and iii) most of its landbank are in prime locations.

Source: BIMB Securities Research - 7 Aug 2018