MB World reported 3QFY19 core PATMI of RM13.7m (-5.5% QoQ, +102.4% YoY), which brings the 9MFY19 sum to RM45.9m (+15.9% YoY), forming 72.7% of our full year forecast. New sales of RM43.1m was achieved in 3Q19, bringing 9M19 sales to RM164.9m. Unbilled sales stood at RM134.4m, representing a cover ratio of 0.5x. FY19 scales higher with the extra contribution from their maiden project Melaka (Novo 8 Residence) while Taman Sri Penawar continues to anchor the earnings base. We maintain our forecasts and BUY call with a lower TP of RM2.24 based on a higher discount of 50% (from 40%) to RNAV of RM4.47 to reflect the weak property sentiment coupled with the reduction in cover ratio.

Within expectations. MB World reported 3QFY19 core PATMI of RM13.7m (-5.5% QoQ, +102.4% YoY), which brings the 9MFY19 sum to RM45.9m (+15.9% YoY), forming 72.7% of our full year forecast.

Dividend. None Declared

QoQ. 3Q19 revenue decreased -12.2% to RM79.3m (from RM90.4m) from lower progressive billings. Consequently, core PATMI fell -5.5% to RM13.7m (from RM14.5m) in tandem with revenue but was cushioned by a higher margin product mix.

YoY. Revenue improved 82.2% from RM43.6m due to the issuance of CCC for 256 units double storey terrace houses in Taman Sri Penawar in the quarter. Consequently, core PATMI increased 102.4% from RM6.8m in tandem with revenue coupled with a higher margin product mix.

YTD. Revenue rose 31.6% to RM275.1m (from RM209.1m) due higher recognition of progressive billings from projects in Taman Sri Penawar. Consequently, core PATMI increased 15.9% to RM45.9m (from RM38.6m) in tandem with revenue but was slightly dragged by higher effective tax rate.

Sales status. New sales of RM43.1m was achieved in 3Q19, bringing 9M19 sales to RM164.9m. Unbilled sales stood at RM134.4m, representing a cover ratio of 0.5x.

Outlook. FY19 scales higher with the extra contribution from their maiden project Melaka (Novo 8 Residence) while Taman Sri Penawar continues to anchor the earnings base. Recall that FY18 had launches worth up to RM623m from these projects.

Forecast. Unchanged.

Maintain BUY with a lower TP of RM2.24 (from RM2.75) based on a higher discount of 50% (from 40%) to RNAV of RM4.47 to reflect the weak property sentiment coupled with the reduction in cover ratio. Nonetheless, 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 - 25 Nov 2019