MB World’s 1Q18 core PATMI of RM11m (+182.1% YoY) was within expectation. The lower QoQ results were mainly due to high base effect while higher YoY results were attributable to contributions from the new phases of projects. Unbilled sales was at RM231m (1x cover) and new sales of RM72m is on course to meet full year target. Our FY18 and FY19 earnings are lifted after minor model up keeping. Maintain BUY with unchanged RNAV-derived TP (35% discount) of RM2.75. We continue to like MB World as proxy to the Pengerang’s growth story.

Within expectation. 1Q18 revenue of RM74.3m was translated into a core PATMI of RM10.8m, accounting for 24.3% of our full year forecast.

QoQ. 1Q18 revenue declined by 29.3% mainly due to high base effect resulting from the completion Pinnacle Tower in 4Q17. Core PATMI stood at RM10.8m (-37.2%) in tandem with the lower revenue.

YoY. Revenue grew by 152.9% driven by the contributions from the new phases of projects in Taman Sri Penawar. Core PATMI improved by 182.1% thanks to the higher overall revenue.

Outlook. FY18 core PATMI is expected to scale to new high with healthy take-up rate of its projects and unbilled sales of RM231m (1x cover ratio). New sales of RM72m achieved in 1Q18, on course to meet full year target of RM231m.

Forecast. Our FY18 and FY19 earnings are lifted by 3.3% and 3.0%, respectively after minor model up keeping adjustment.

Maintain BUY with unchanged TP of RM2.75 based on unchanged 35% discount to RNAV of RM4.23. We like MB World given its first mover advantage to capture the spillover growth effect from the RAPID project in Pengerang. Earnings growths are well supported by the unbilled sales and strong take-up of newly launched projects. Besides, potential increase in dividend following the projected strong earnings is another positive point.

Source: Hong Leong Investment Bank Research - 30 May 2018