• MCT’s 1Q2018 (FYE: DEC 2018) core earnings almost doubled to RM20m on steady construction progress of existing projects. 1Q2018 core earnings were inline at 49%.

• New launch project Casawood only achieved 47% take-up rate. Nonetheless, efforts on landbanking continued for future products.

• Maintain HOLD with lower RM0.65 TP (from RM0.81) as we peg a lower PE of 10x FY19F (from 14.3x FY19F). While this is below the sector’s 5-year historical average of 12.0x, we think it is fair amidst the uninspiring take up rate. Core profits improved on better construction progress

MCT’s 1Q2018 (FYE: DEC) core profits almost doubled yoy to RM20m on higher revenue recognition of existing projects. Revenue grew 34% to RM126m over steady construction progress of the Lakefront Residence (Phase 1), the Lakefront PRIMA and the Cybersouth Belleveu. The earnings surge was also due to a low-base effect; in 1QFY18 (Jul-Sep 2017), most projects then were near completion. Overall, 1Q2018 core earnings were inline with our estimates at 49% of our 6-months FY18 Year-to-Dec forecast.

Weaker qoq performance

On qoq basis, revenue fell 32% as several projects including Skypark@Cyberjaya and Lakefront Villa were completed and delivered in Jul 2018. The value of unsold units also increased to RM227m (4QFY18: RM152m). Its newest project, Casawood @Cybersouth which was launched in the quarter achieved take-up rate of 47% amidst prevailing soft market sentiment. Nonetheless, its unbilled sales stood at RM1.1bn which could still provide earnings visibility for the next 2-3 years.

Continue landbanking while awaiting market upturn

In Aug 2018, MCT announced that it is acquiring a parcel leasehold land with 7,143 sq m area from Tropicana Corp for RM42.3m in cash. MCT plans to develop a luxury condominium worth RM265m on the land with launching expected sometime in 2019. This is the second land it purchased from the vendor in the same vicinity after acquiring a 9.12 acre to plot in Tropicana Metropark for RM143m in Apr 2018. We expect more landbank acquisition in future given its low net gearing of only 0.06x.

Valuation and recommendation

Maintain HOLD with a lower TP of RM0.65 as we peg lower P/E of 10x FY19 PE (from 14.3x FY19 PE). This is below the sector’s 5-year historical average of 12.0x. We think this is fair given the soft backdrop of the property which reflected in the weak take-up rate of its latest launch. On other hand, long term proposition remains in view of i) huge unbilled sales of RM1.1bn; ii) low net gearing of 0.06x and iii) most of its landbank are in prime locations.

Source: BIMB Securities Research - 15 Nov 2018