• Maintain NEUTRAL, TP drops to MYR0.67 from MYR0.75, 2% upside. MCT’s earnings are above estimates, as three projects were handed over during the quarter. Nonetheless, unbilled sales fell to MYR960m (from MYR1.1bn in Sep 2018) due to the lack of launches. We maintain our FY19- 20F earnings – but our TP decreases on a higher discount to RNAV of 60% (from 55%), due to uncertainty over future project launches. Despite changes in management, the group will continue its focus as a quality property developer with a diverse mix of products ranging from affordable homes to luxury properties in exclusive neighbourhoods.

• 6QFY18 core net profit of MYR36.6m is above our expectations. Revenue surged >100% YoY and 45% QoQ, mainly from the completion of Lakefront @ Cyberjaya and Cybersouth projects during the quarter. Meanwhile, MCT’s net profit also increased by >100% YoY and 80% QoQ, arising from higher margins due to construction cost savings from Lakefront Homes and Residences. Please note that the company recently changed its financial year end to Dec 2018, from Jun 2019.
• Three projects handed over during the quarter. Cybersouth Phase 1B – Casa Green was handed over in Oct 2018, while Cybersouth Phase 2B – Casa View and Lakefront Residence Phase 1 were handed over in Nov 2018. There were no new launches in the quarter. We believe the group’s performance over the near term will be driven by Casawood @ Cybersouth, with a 52% take-up since its launch in May 2018.
• As at Dec 2018, total unbilled sales fell to around MYR960m (from MYR1.1bn in Sep 2018) due to the lack of new launches. Current unbilled sales should provide earnings visibility over the next 2-3 financial years for the group. MCT’s new sales in 6QFY18 rose higher to MYR164m (vs MYR113m in 5QFY18).

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

• MCT has appointed Mr Teh Heng Chong as CEO and executive director (effective 4 Mar) following the resignation of Mr Jose Juan Z Jugo. Despite changes in management, the group will continue to focus on building its brand as a quality property developer with diverse products.

Source: RHB Securities Research - 1 Mar 2019