Maintain NEUTRAL; new TP of MYR0.75 from MYR0.83, 9% upside. We remain cautious on the property market. MCT recently changed its FYE to Dec 2018 from Jun 2019. 5QFY18 core earnings came within expectations, mainly due to contributions from Lakefront @ Cyberjaya and Cybersouth projects. Unbilled sales fell to MYR1.1bn, due to the lack of new launches. With the uncertainty in the property market, management has held back on its launch of The Place 2.

5QFY18 earnings within expectation. MCT’s 5QFY18 core net profit of MYR20.3m was within our expectations. Revenue rose 33.8% YoY, mainly from Lakefront @ Cyberjaya and Cybersouth projects. Meanwhile, net profit surged by 92.4% YoY on higher margins, which in turn were due to construction cost savings from Lakefront Homes and Residences. Note that the company recently changed its FYE to Dec 2018, from Jun 2019.

Slower construction progress. Skypark @Cyberjaya was completed and handed over in July. Liquidated and ascertained damages stood at MYR0.5m for Casa Green and Casa View at Cybersouth and Lakefront Residences. We expect these projects to be handed over by the end of this year.

Unbilled sales fell. As at September, total unbilled sales fell to around MYR1.1bn (MYR1.4bn) due to the lack of new launches. The current unbilled sales should provide earnings visibility over the next 2-3 financial years for the group. MCT’s new sales in 5QFY18 slightly recovered to MYR113m (vs MYR70m in 4QFY18).

The Place 2 launches delayed. With the challenging property market, the group has held back its pipeline launch, ie The Place 2 (70% JV) mixed development project in Cyberjaya. The project has a total GDV of MYR1.08bn and is located next to Cyberjaya City Centre, within walking distance to the Limkokwing University of Creative Technolgoy.

Landbanking in exclusive neighbourhood. The group recently completed its landbanking exercise to acquire 5.61 acres and 3.52 acres of land in Bandar Damansara, Petaling Jaya, Selangor from Tropicana Golf & Country Resort. With the additional proposed acquisition of 1.765 acres in Aug 2018 in the same area, it will have land with a total GDV of MYR892m in Persiaran Tropicana.

Management has guided that the company will build its brand as a quality property developer, with a diverse mix of products ranging from affordable homes to luxury properties in exclusive neighbourhoods.

Maintain NEUTRAL. We make no change to our forecasted earnings, but adjust them accordingly to the new FYE. Having said that, with the uncertainty in the property market, we cut our TP to MYR0.75, based on a higher discount to RNAV of 55% (from 50%).

Source: RHB Securities Research - 15 Nov 2018