• Maintain NEUTRAL and MYR0.21 TP, implying an expected total return of -5%. Earnings came in above expectations on steady construction progress. While project launches slated for 1H20 – delayed from FY19 – may prospectively boost earnings, we look on to FY20 with caution, given our concerns on market headwinds surrounding management and the public spread, as the current level of c.24% is still short of the listing requirements. A downside risk: Further project delays.

• Earnings met expectations. 4Q19 core net profit of MYR18.7m (+1.4% QoQ, -21% YoY) brought overall FY19 earnings to MYR45.6m – this greatly exceeded our FY19 estimates of MYR35.8m. Nevertheless, full-year core net profit plunged 31.4% YoY on higher opex and interest expenses. The performance of MCT’s full-year revenue (-0.1% YoY) was premised on encouraging construction progress for all its projects, with the aim of handing >3,000 units across four projects within 1H20. No dividends were declared for the quarter, as expected.

• Highly anticipated launches. Launches in the pipeline for FY20 comprise Cybersouth Casa Bayu, Alira Metro Park (GDV of MYR1bn), and Tropicana Grande. Recall that MCT delayed the launching of a couple projects from the targeted 4Q19 to 1Q20, pending approvals from the authorities. The projects are at Lakefront in the Cybersouth township in Cyberjaya – properties priced between MYR250,000 and MYR700,000 – and a development in Subang Jaya. We expect some of these new launches to be delayed again, given the market uncertainties. Consequently, MCT may only be able to push its property sales and replenish unbilled sales in 2H20. Recall that unbilled sales – as at 3Q19 – stood at MYR672m.

• Public spread still below requirements as at Nov 2019. Unchanged from the public spread announced in Nov 2019, MCT’s public shareholding spread still stands at 24.59%. With plans having been in place for months for a resolution – ie discussions with major shareholders on the selling down of shareholdings, engagements with investment banks on private placement exercises for public entities, etc – the group received an approval letter for a further extension of six months until Aug 2020 to comply with the public spread requirement.

• We maintain and TP, only increasing our earnings forecasts c.2% to reflect our cautious outlook for FY20 – in view of the political uncertainties. We also introduce our FY22F earnings of MYR44.9m. Our TP is based on a discount to RNAV of 80%, reflecting our concerns over the group’s shareholding spread, management reshuffling, and delays in launches.

Source: RHB Securities Research - 2 Mar 2020