MGB Berhad (MGB: 7595) is a construction and engineering company with a diverse portfolio in property development and industrial ventures. A key focus for MGB is its affordable housing projects under the Rumah Selangorku scheme and multiple construction projects that will drive the company’s growth. We expect the company to register net earnings of RM58.6m and RM61.8m in FY24 and FY25, respectively. BUY with a TP of RM1.36, based on a 13x PER (similar to peers of comparable scale) over FY25 EPS, supported by solid unbilled sales of RM2.6bn (property development) and a remaining order book of RM1.3bn (construction).

MGB has a robust portfolio of ongoing construction projects comprising of Kita @ CyberSouth, Idaman Melur, Idaman Cahaya, Idaman Sari, and Saujana Indah. As of August 2024, MGB’s construction segment had secured an order book of RM1.31bn. Additionally, MGB's venture into Saudi Arabia, supplying and installing precast concrete products for large-scale developments such as Roshn Alarous (a massive housing project in northern Jeddah) marks an important step in expanding its geographical footprint. MGB has already secured two purchase orders worth SAR94.5m (approximately RM119.5m) for the construction of 400 villas for this development.

In the property development division, the Rumah Selangorku Idaman series of projects (GDV: RM786m), comprising of affordable housing units, has seen impressive sales, with most units already taken up. MGB is also involved in industrial land development via the Kertih Terengganu Industrial Park (KTIP) (GDV: RM747m), in collaboration with Terengganu Inc., thus enhancing its presence within the industrial segment.

Looking forward, MGB has still several projects in the pipeline namely; The Pocket Lands Developments (GDV: RM1.1bn) and RSKU 3.0 series in Puchong and Cameron Highlands (GDV: RM107m) are expected to be launched over the next few years.

Financial leverage is manageable, with low net gearing of 0.07x as of 30 June 2024. Our BUY recommendation is based on the company’s strong unbilled sales and remaining order book, supported by (i) solid financial performance, (ii) a growing project pipeline, and (iii) robust market demand, making it an attractive value proposition within the construction and property development sectors.

Source: Rakuten Research - 26 Sep 2024

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