MB World reported 2QFY19 core PATMI of RM14.5m (-17.7% QoQ, -34.2% YoY), which brings the 1HFY19 sum to RM32.2m (-2% YoY), forming 51% of our full year forecast. Despite a lower margin product mix, 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. We maintain our forecasts and BUY call with unchanged TP of RM2.75 based on unchanged 40% discount to RNAV of RM4.59.

Within expectations. MB World reported 2QFY19 core PATMI of RM14.5m (-17.7% QoQ, -34.2% YoY), which brings the 1HFY19 sum to RM32.2m (-2% YoY), forming 51% of our full year forecast.

Dividend. Declared first interim dividend of 5.0 sen per share (2QFY18: none) going ex on 25 Oct 2019.

QoQ/YoY. 2Q19 revenue decreased -14.3%/-1% to RM90.4m (from RM105.5m/ RM91.3m) largely due to a higher percentage of completion of projects in Taman Sri Penawar in the preceding quarters. Consequently, core PATMI fell -17.7%/-34.5% to RM14.5m (from RM17.7m/RM22.1m) in tandem with revenue coupled with a lower margin product mix.

Sales status. New sales of RM53.8m was achieved in 2Q19, bringing 1H19 sales to RM121.8m. Unbilled sales stood at RM191.6m, representing a cover ratio of 0.9x. Management is expecting to launch projects worth up to RM553m GDV in FY19. The breakdown of the projects is as follows: i) Taman Sri Penawar, RM267m; ii) Puteri Senibong, RM47m; iii) Ayana Residence, RM82m; and iv) Sierra Residence, RM157m. As such, we believe the FY19 sales target of RM300m to be achievable upon the launch of these projects.

Outlook. Despite a lower margin product mix, 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. Recall that FY18 had launches worth up to RM623m from these projects. With regards to sales target, management is targeting RM300m for FY19.

Forecast. Unchanged.

Maintain BUY with unchanged TP of RM2.75 based on unchanged 40% discount to RNAV of RM4.59. 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 4x are among the positives.

Source: Hong Leong Investment Bank Research - 29 Aug 2019