Results

2Q14 core PAT rose 21.4% yoy to RM84.7m, with YTD net profit of RM168.8m making up 51% and 50% of HLIB and consensus estimates respectively.

Deviations

None

Dividends

None in 2Q (typically declared in 4Q).

Highlights

Stable margins in 2Q. Gross profit margin was fairly stable at 26.8% in 1Q, vs. 27.2% in the previous quarter.

Record unbilled sales of RM4.79bn is 2.8x FY13 property revenue and ensures high earnings visibility.

Maintaining sales momentum. MSGB chalked up record RM780m sales in 2Q. Collectively, its top 4 projects made up >70% of 1H sales, namely Savanna Executive Suites at Southville City@KL South, Bangi (serviced residences from RM338k), and D'sara Sentral (DS) in Sungai Buloh (SoVo from RM380k), Icon City @ PJ and Meridin @ Medini.

Sales outlook remains encouraging. We believe MSGB should be able to sustain its sales momentum and attain its goal of 20% sales growth by year-end. Its recent launch of Lakeville two weeks ago was a major success with 85% of its first 4 towers taken up on the first day itself (1,057 units worth RM708m). To keep the train going, MSGB has lined up RM2.0bn of launches in 2H across the 3 main markets of Malaysia, including serviced apartments at DS in 2H, The Coastal @ Southbay City in Nov 2014, as well as the preview of Bandar Meridin East @ Pasir Gudang in 4Q.

Projects are well-positioned. MSGB continues to stay ahead of the curve, with its Klang Valley projects located at desirable hot spots such as KL South and the MRT line. In Johor, >90% of its projects are landed townships which should see resilient demand, whilst Southbay will benefit from the opening of Penang Second Bridge.

Low net gearing. Net gearing remains at a very comfortable 0.21x as MSGB is able to secure extended payment terms for its new landbank, such as its 88.7 acres in Puchong to be paid over a period of 4 years. This puts MSGB in a good position to pursue its landbanking ambitions, particularly the 170-acre MOU land in Puchong. For more details, please refer to our report dated 29th Aug.

Risks

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

Forecasts

Maintained.

Rating

BUY

MSGB currently trades at 9.0x FY15E P/E vs its historical 5- year P/E average of 11.1x

Valuation

TP maintained at RM2.89 (maintain 20% discount to RNAV), which values MSGB at 10.6x FY15E P/E, vs. its historical 5- year P/E average of 11.1x

Source: Hong Leong Investment Bank Research- 2 Sep 2014