Results

1Q13 core PAT rose 25% yoy to RM69m, making up 23% and 24% of HLIB and consensus estimates respectively.

Deviations

None

Dividends

None

Highlights

Earnings visibility remains strong, with unbilled sales rising 12% qoq from RM3.16bn in 4Q12 to RM3.55bn in 1Q13 (2.2x FY12 property revenue).

Heavy reliance on high rise… We estimate that close to 70% of its RM3.55bn unbilled sales come from its high-rise projects such as Icon City and M City.

Land acquisitions finally announced… We had been waiting for MSGB to announce the land acquisitions since its proposed RM400m rights issue back in Dec 2012. We had made a baseline estimation of RM4.0bn in new GDV, but thanks to favourable payment terms, MSGB has secured a combined RM5.5bn total GDV for its two new projects in Medini and Kepong. Both projects will be soft launched in 1H 2014.

Still bullish on Iskandar Malaysia (IM)… MSGB’s latest IM project is Meridin@Senibong, having acquired 35.26 acres of freehold land for RM365.5m (RM238 psf). Meridin@Senibong is targeted for soft launch in 1H 2014 and is expected to take 4-5 years to complete.

New project in Kepong… MSGB also acquired 12.4 acres of land in Kuala Lumpur for RM72.8m (RM135 psf), to be developed into Lakeville Residence (RM1.15bn GDV).

Beefing up its pipeline…With the acquisition of two pieces of new land and the GDV enhancements to Southville City, MSGB’s pipeline is now boosted by RM7bn to RM22.8bn, which management expects to provide significant earnings visibility over the next 7 to 8 years.

Net gearing remains under control… MSGB has done a good job of keep net gearing under control (0.19x in 1Q), but will need to maintain its sales momentum and progress billing of new projects to keep it under control.

Risks

• Slower than expected sales; execution risks for projects; inability to replenish landbank.

Forecasts

• FY13-14 net profit forecast raised by 1.9-5.8% to factor in higher unbilled sales.

Rating

HOLD

• Given the positive news on its new landbank and sector rerating, we upgrade our TP but maintain HOLD.

Valuation

• Given MSGB’s strong growth momentum, we raise TP from RM2.41 to RM3.89 (reduce discount to RNAV from 40% to 10%).

Source: Hong Leong Investment Bank Research - 29 May 2013