Results

• Missed Estimates – MGB missed our full-year forecast by 41.0% by posting a net profit of RM14.8m (4Q22 PAT: RM3.4m) compared to  RM27.1m in the previous year, mainly due to an overall slightly lower than forecasted revenue and higher cost of sales and expenses recorded mainly affected by material prices and labour shortages.

• Lower but steady QoQ – The Group has recorded an overall lower performance in 4Q22 in revenue (RM143.3m, -7.5% QoQ) and net profit (RM3.4m, -10.3% QoQ) however margins have grown slightly where GP margin added 1.9% to 15.9%, operating margin added 1.5%  to 5.3%, and PBT added 1.4% to 4.7%.

• Emerging Revenue Stream – MGB’s property development segment has shown improvements of +41.7% YoY from RM16.8m to RM23.8m  of revenue. This positive result is led by the new and successful launches of Laman Bayu Phase 3 and 4 having recorded revenue with  95.4% that have been sold. Aside from that, the development of Phases 1 and 2 of Laman Bayu has been completed and is ready to be moved in. We expect revenue from the segment to continue to improve towards pre-Covid levels.

• Optimism for times ahead – Optimism has emerged for MGB as they prepare to face the year with its core objective of constructing and developing affordable housing under “Rumah Selangorku Idaman” whilst grounded by its existing order book of RM1.93b supported by its parent company LBS Bina Group Berhad’s goals to hit RM2b is sales again in 2023 to provide earnings in the upcoming years. We take a  similar stance to MGB as they continue to focus on providing affordable housing in line with the government’s unhindered people-centric objectives. 

Earnings Outlook/Revision 

• Forecast lifted – We are raising our revenue and EPS forecasts for  FY23 by 53.4% and 34% respectively while estimates for FY24 are  4.9% and 7.5% higher respectively from FY23 after increasing our progress billings on current projects and upcoming launches in FY23,  we have also forecast better margins as building materials and labour shortages ceases to be problematic.

Valuation & Recommendation

• Maintain BUY with a higher target price of RM0.62 (from  RM0.57) following our adjustments. Our revised target price is pegged at an 11x PE multiple to the Group’s 2023F diluted EPS which is the -1 Standard Deviation of its 5-year historical mean PE that is also in line with our overall cautious outlook of the sector.  

Source: JF Apex Securities Research - 20 Feb 2023