MB World’s FY18 core PATMI of RM48.4m was within expectations. New sales of RM100.4m was achieved in 4Q18, bringing FY18 sales to RM382m (exceeding target of RM231m). Unbilled sales stood at RM262m, representing a cover ratio of 0.9x. FY19 will continue to scale higher with the extra contribution from their maiden project Melaka (Novo 8 Residence) while Taman Sri Penawar will continue to anchor the earnings base. Maintain forecasts and BUY call with unchanged RNAV-derived TP (40% discount) of RM2.68. We continue to like MB World as a proxy to the Pengerang growth story, trading at an attractive forward P/E of 4-5x.

Within expectations. FY18 revenue of RM287m translated into a core PATMI of RM48.4m, accounting for 97% of our full year forecast.

Dividends. Declared second interim dividend of 3.1 sen per share (ex-date: 23 Apr 2019) (4Q17: none), bringing FY18 dividends to 10 sen per share (exceeding our FY18 dividend forecast of 6.9 sen per share).

QoQ. 4Q18 revenue increased 78.9% to RM77.9m (from RM43.6m) from the completion of the 161 units of double storey shop offices in Taman Sri Penawar. Consequently, core PATMI increased 31.2% to RM8.8m (from RM6.8m) in tandem with revenue but slightly offset by higher operating expenses.

YoY. Revenue declined 25.8% mainly due to the absence of contributions from the Pinnacle Tower project which was completed back in 4Q17. Consequently, core PATMI decreased 48.5% in tandem with revenue in addition to higher operating expenses.

YTD. FY18 revenue increased by 23.3%, attributed to higher sales and progress from the Taman Sri Penawar projects. Consequently, core PATMI increased 43.5% in tandem with revenue coupled with lower effective tax rate (23.3% vs 33%).

Sales number exceeded. New sales of RM100.4m was achieved in 4Q18, bringing FY18 sales to RM382m (exceeding target of RM231m). Unbilled sales stood at RM262m, representing a cover ratio of 0.9x.

Outlook. FY19 will continue to scale higher with the extra contribution from their maiden project Melaka (Novo 8 Residence) while Taman Sri Penawar will continue to anchor the earnings base. Management has yet to disclose the sales target for FY19; we can expect over RM400m worth of GDV launches in FY19.

Forecast. Unchanged pending updates from management regarding GDV launches and progress billing moving forward. Maintain BUY with an unchanged TP of RM2.68 based on unchanged 40% discount to RNAV of RM4.46. We continue to like MB World given its first mover advantage to capture the spill over growth effect from the RAPID project in Pengerang. Earnings growth is well supported by the unbilled sales and strong take-up of newly launched projects. Besides, potential increase in dividend following the strong earnings at attractive forward P/E of 4-5x are among the positives.

Source: Hong Leong Investment Bank Research - 27 Feb 2019