Results

3Q net profit came in at RM36m, bringing 9M earnings to RM112.2m, making up 74% and 79% of HLIB and consensus estimates respectively.

Deviations

None.

Dividends

10.0 sen net DPS was declared in 3Q13, bringing YTD DPS to 25.4 sen, or 97.6% of our 26 sen DPS forecast.

Highlights

Qoq drop in revenue, from RM147m in 2Q to RM127m in 3Q, mainly due to the higher revenue recognition from residential properties sold for the Hijayu 1B development project in 2Q, whilst Hijayu 3D had yet to reach its milestone for revenue recognition in 3Q.

Qoq margin expansion. However, gross profit margin experience sequential qoq expansion due to a change in product mix, rising from 36% to 50%. We attribute this to a higher proportion of revenue derived from sales of industrial properties and commercial land, which command substantially better margins.

Focus remains on Seremban and Johor. MCH still remains very much focused on these two areas, with Seremban accounting for more than 90% of future GDV.

Risks

Slowdown in sales; escalation in construction and raw material costs; downturn in Seremban and Johor.

Forecasts

Maintained.

Rating

BUY 

Positives: Offers great exposure to the thriving satellite town of Seremban.

Negatives: Lack of landbank diversification means the company’s fate is completely tied to that of Seremban.

Valuation

Despite share price performing strongly (up 25% since our 2Q results note), we raise our TP from RM3.46 to RM4.51 (35% discount to RNAV).

We continue to keep MCH as our sector top pick on back of: (1) Our conviction that more upside remains thanks to escalating land prices in Seremban as more Greater KL residents continue to migrate to Seremban; (2) Undemanding FY14E PER of 5.7x vs. more than 10x for mid to large cap developers; and (3) Still attractive FY14E DY of 7.0%, based on 40% payout ratio.

Source:Hong Leong Investment Bank Research - 20 Nov 2013