• Maintain NEUTRAL and MYR0.21 TP, with 11% expected total return. While we are mildly optimistic over the public reception for MCT’s latest prelaunch of CasaBayu in Cybersouth, we maintain our cautious stance overall given the likelihood of further delays in the launches planned for this year (Alira and Aetas), amidst an unpredictable market and unstable economy.
• Diminishing unbilled sales. FY19 was a slow year for MCT with soft sales registered for the year, which in turn saw its share price plunge by c.60%. This is unsurprising, considering the lag in construction, which only saw a mild pickup in 2H19. Unbilled sales as at end-FY19 stood at c.MYR600m while the figure for 1Q20 was around MYR490m (vs MYR678m in 1Q19), clearly demonstrating a steady decline. Given the persistent delay of launches throughout FY19 and in FY20, we expect unbilled sales to deplete further in the coming quarters.
• Unlikely to ease off inventory anytime soon. Around 80% of MCT’s unsold inventory (worth MYR300m) makes up projects from Phase 2 of 1Malaysia Housing Programme (PR1MA). While management is upbeat at the prospects of the Home Ownership Campaign (HOC) being able to ease off inventory, we note that there may be restrictions to the campaign seeing that most of MCT’s projects are ongoing, instead of completed. Regardless, MCT aims to have Phase 1 of PR1MA completed in FY20 and 50% of Phase 2 by next year. We believe that big cap developers with a large equity branding and geographical presence are the ones to benefit more substantially from HOC.

• Highly-anticipated launches. The recent pre-launch for CasaBayu (GDV: MYR38m) in Cybersouth has been met with considerable demand, with 22 units taken up and 40 booked (out of a total of 80 units released). However, management is unable to provide a figure for new sales YTD, as the 168 bookings on hand are unable to be converted just yet. Other launches in the pipeline for FY20 comprise Alira Metropark (GDV: MYR530m) and Aetas Damansara (GDV: MYR545m). Recall that the launch for these projects have been delayed from 4Q19 to 1Q20, and now to 4Q20. Although attractive, we expect some of these new launches to be delayed even further as uncertainties loom in the market and economy. Hence, MCT may only be able to push its property sales and replenish its unbilled sales next year.

• Public spread met requirements. MCT is finally compliant with the public shareholding requirement after Tabung Haji’s Urusharta Jamaah SB disposed of its shares. Public shareholding now stands at 25.009% (from 24.59%) per the announcement in March.

• Maintain NEUTRAL. We make no changes to our TP, but increase our FY21F- 22F earnings by 3-6%, as we believe that property sales will only begin to be reflected in 1Q21F, at the earliest. Our TP is based on a discount to RNAV of 80%, as we maintain our concerns over the group’s internal reshuffling, and delays in launches.

Source: RHB Securities Research - 22 Jun 2020