Highlights

We met with the management of MSGB and came away feeling reassured that it remains well on-track to meet its RM3bn sales target for FY13. Key highlights:

Expanding Johor footprint. Meridin @ Senibong, located next to Permas Jaya, is on track to soft launch in 2H 2013. This is a substantial project, with GDV of RM4.35bn on 35 acres of freehold land, and comes with an unobstructed view of Singapore. Meanwhile, Meridin @ Medini has enjoyed robust demand, and is currently 78% taken up with pricing from RM630 psf onwards.

D’sara Sentral. Its launch has been brought forward to 4Q 2013 (to compensate for the delay of Southville), with SoVo units priced from RM650 psf while the retail units will be priced from RM800 psf onwards.

Southville delay. The preview of this project has been delayed from mid 2013 to 4Q, as MSGB is awaiting approval of the new North-South Highway interchange. Phase 1, Savanna Suites, has received overwhelming response with more than 15,000 registrants as of July 2013.

Kepong project launch. Lakeville Residence is another major new project for MSGB, to consist of high rise blocks with RM1.15bn of GDV, priced from RM650 psf. It will be soft launched in 1H 2014.

East Malaysia foot print. The 10-storey shop office blocks in Setera Avenue have been fully sold, while the retail units are 44% sold. MSGB is now focusing on the KKCC (Kota Kinabalu Convention City) project with RM1.4bn GDV, to commence in 1H 2014.

Sales on track. 1Q sales of RM750m implies 100% run-rate and we believe MSGB will continue to deliver in terms of its sales targets (RM3bn for 2013).

Catalysts

Strategic land acquisitions; favourable land payment terms; sizable land allocation for the RRI development in Sg Buloh.

Risks

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

Forecasts

Maintained.

Rating

HOLD

Positives: Rapid turnaround times and aggressive land banking; strong proxy to Iskandar Malaysia.

Negatives: Pressure to maintain sales momentum to sustain cash flow and capital working requirements.

Valuation

Maintained at RM2.38 (45% discount to RNAV).

Source: Hong Leong Investment Bank Research - 18 Jul 2013