Results

• Within Expectations: MSGB’s 9MFY15 PATAMI increased by 5% to RM274m, in line with expectations, accounting for 75% of ours and consensus’ full year forecasts.

Highlights

• 9MFY15 revenue grew by 13% and PATAMI increased by 5% mainly attributable to higher work progress and sales from the group’s ongoing developments.

• In 3QFY15, MSGB achieved a record high new property sales of RM640m (versus RM400m in 2Q15), bringing 9MFY15 sales to RM1.6bn, on track to achieve its full year target of RM2.3bn. New sales were derived mainly from Klang Valley (~90%) with the rest from Johor, Penang and Sabah.

• YTD, MSGB has launched RM1.45bn worth of projects, mainly in Klang Valley (~82%) with the rest in Johor. In 2QFY15, MSGB has deferred some projects in Penang and Johor from 2H15 to 2016. To note, there are no launching in Penang this year mainly due to delay in advertising permits and developer licenses (APDL).

• Upcoming major launches mainly focus on affordable pricing around RM500k benchmark such as D’Sara Sentral serviced apartments from RM580k per unit, Lakeville services apartment at RM595k per unit and Cerrado services apartments in SouthVille from RM388k per unit.

• Balance sheet remains solid with net gearing at 0.05x which will allow the company to well position for future landbanking opportunities and enhance cash flow management in current tough environment.

• Unbilled sales currently stand at RM4.8bn, representing 1.8x of the group’s FY14 property revenue. Excluding the Seremban and Puchong land, MSGB remaining landbank has a potential total GDV of RM26bn, 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

• Unchanged.

Rating

HOLD

• Healthy balance sheet with low net gearing; and attractive dividend yield of 4.3% based on minimum dividend payout of 40%.

Valuation

• TP is unchanged at RM1.44 (maintain 35% discount to RNAV). Maintain HOLD with dividend yield of 4.4%.

Source: Hong Leong Investment Bank Research - 30 Nov 2015