Results

• Within Expectations: MSGB’s 1HFY15 PATAMI of RM189.4m came in within expectations, accounted for 49% of ours and consensus’ full year forecasts.

Highlights

• 1HFY15 revenue and PBT of RM1.56bn and RM189m, respectively, showed a positive 16.1% and 10% growth yoy, attributable to higher work progress and sales from the group’s ongoing developments.

• In 2QFY15, MSGB achieved new property sales of RM400m, bringing 1HFY15 sales to RM961m, fell short of company full year target of RM3.4bn. As a result, MSGB has revised down sales target for FY15 from RM3.4bn to RM2.3bn in view of the challenging market outlook. The revision in sales target is mainly from Penang, Johor and Sabah with Greater KL’s sales target largely unchanged.

• MSGB also revised down GDV launches from RM3.4bn to RM2bn in FY15 by deferring some projects in KL, Penang and Johor from 2H15 to 2016.

• MSGB has decided not to proceed with the acquisition of 89 acres of land in Puchong. The vendor is entitled to 1% or RM6.6m of the deposit while the remaining 9% or RM59m will be refunded to MSGB. We have factored in RM628m NPV for this project and cancellation of the acquisition will reduces our RNAV by 20sen/share or 8%.

• We believe the cancellation of the land acquisition in Seremban and Puchong will put MSGB in a solid position given the challenging market outlook. The strong balance sheet with net cash position will allow the company to well position for future landbanking opportunities and enhance cash flow management in current tough environment.

• Unbilled sales stand at RM4.8bn, representing 1.8x of the group’s FY14 property revenue. Exclude the Seremban and Puchong land, MSGB remaining landbank has potential total GDV of RM26.4bn, which is sufficient to sustain the group for the next 8-10 years.

Risks

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

Forecasts

• FY15 and FY16 earnings were reduced by 5% and 10% respectively after we lower down our sales target from RM3bn to RM2.25bn in FY15 coupled with cancellation of Puchong land acquisition.

Rating

HOLD

• Healthy balance sheet with net cash position; and attractive dividend yield of 4.2% based on minimum dividend payout of 40%.

Valuation

• TP is adjusted from RM1.57 to RM1.44 (maintain 35% discount to RNAV). Maintain HOLD with dividend yield of 4.2%.

Source: Hong Leong Investment Bank Research - 27 Aug 2015