Results

4Q net profit came in at RM40.7m, bringing full-year earnings to RM152.9m, making up 101% and 103% of HLIB and consensus estimates respectively. Deviations None.

Dividends

5 sen net DPS was declared in 4Q13, bringing YTD DPS to 30.4 sen, or 17% above our 26 sen DPS forecast.

Highlights

Qoq rise in revenue, from RM127m in 3Q to RM144m in 4Q, mainly due to higher revenue recognition of residential properties sales from the Nusari Bayu and Hijayu series residential development projects located in Bandar Sri Sendayan.

Qoq margin expansion. At the same time, gross profit margin experienced sequential expansion, rising from 50% in 3Q to 54% in 4Q. The company attributes this to a change in product mix, namely higher sales for the Hijayu 3D development project.

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

After rolling over our numbers, our FY14-15 forecasts are minutely reduced by 0.8-0.9%, while our TP is marginally down from RM4.51 to RM4.49.

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 11% since early Feb), MCHB remains 13% below our RM4.49 TP and still trades at 6.0x FY15 P/E, which remains attractive vs. 10x P/E for the sector. We continue to keep MCH as one of the top picks of the sector 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 FY15E P/E of 6.0x vs. 10x for mid to large cap developers; and (3) Still attractive FY15E DY of 6.6%, based on 40% payout ratio.

Source: Hong Leong Investment Bank Research - 26 Feb 2014