• Maintain NEUTRAL with new MYR0.21 TP from MYR0.26, 5% expected total return. A pick-up in construction progress lifted the group’s topline for the quarter but core net profit dipped 29.4% YoY. Nevertheless, earnings came in line with our expectations. Public spread is still a cause for concern, as the current level of 24% is still short of the listing requirements. Share price has fallen >70% YTD from MYR0.75 at the start of the year.

• Earnings met expectations. 9M19 core net profit of MYR26.9m came in within expectations, at 75% of our full-year estimates. 3Q19 revenue rose 11.5% YoY (+31.5% QoQ), attributed to the pick-up in the construction progress for all of its projects – with the aim of handing over 3,000 units across four projects by 1H20. 3Q19 core net profit, on the other hand, decreased 29.4% YoY and >100% QoQ from higher interest, and unrealised forex loss of MYR2m.

• Marginal decrease in unbilled sales. The latest unbilled sales amount as at 3Q19 stood at MYR672m, a dip of c.3% from last quarter’s MYR692m. As some launches are likely to be delayed to next year, we expect unbilled sales to deplete further in the coming quarters.

• Launches for 4Q19 delayed. MCT has several projects at Lakefront in the Cybersouth township in Cyberjaya – with the focus on residential properties priced between MYR250,000 and MYR700,000, and some commercial units to complement the said projects. These projects were slated to be launched in 4Q19, but have been delayed to 1Q20 pending approvals from the authorities. The first phase of the group’s project on the newly acquired land in Subang Jaya, initially expected to launch by 4Q19, has also been delayed.

• Public spread still below requirements as of November. Unchanged from the public spread announced back in August, MCT’s public shareholding spread still stands at 24.59% – below the public shareholding spread requirement of at least 25%. Plans to resolve this issue include discussions with MCT’s major shareholders on the possibility of selling down their shareholdings, engagements with investment banks on private placement exercises to those deemed public and increased communication with potential investors, analysts, research houses, and shareholders to instil confidence.

• Slash TP by 19%, maintain forecasts. We maintain our earnings forecasts as the results reported were as expected. Our new TP is based on a larger discount to RNAV of 80% from 75% to reflect our concerns over the group’s shareholding spread, management reshuffling, and delays in launches

Source: RHB Securities Research - 22 Nov 2019