Still BUY and SOP-derived TP of MYR1.16, 37% upside and c.2% FY24F yield. MGB’s 1H24 core profit of MYR28.2m (+20% YoY) met our estimates at 50% of full year projections but broadly met Street’s at 48%. We expect the company to continue charting a solid earnings growth of 16% in FY24F backed by higher progress billings of its property sales projects, especially the Rumah Selangorku Idaman (Idaman) projects spread over a total GDV of c.MYR1.1bn and c.3.2k units.
MGB’s 1H24 core profit was underpinned by the property development arm which recorded a >100% YoY PBT growth due to higher unit sales progress and progress development for the Idaman Melur (92.8% sold), Idaman Cahaya Phase 1 and 2 (92.3% sold), Idaman Sari (97.3% sold) and Saujana Indah Phase 1 and 2 (c.45% sold). As such, PBT margin for the segment remained strong at 17% for 1H24 (1H23: 18%). Meanwhile, the construction arm saw an 87% YoY drop in PBT during 1H24 amidst projects nearing the tail end such as Idaman BSP and Kita Mekar and Alam Perdana Phase 4 and 5. Additionally, the group continued to incur some start-up costs in its precast operations in Saudi Arabia (KSA).
MGB’s outstanding orderbook of MYR1.3bn as of end 2Q24 (vs MYR1.2bn as of end 1Q24) includes three jobs (cumulative contract value: c.MYR442m) related to LBS Bina’s (LBS MK, NEUTRAL, TP: MYR0.93) key township development – KITA@Cybersouth. As such, MGB continues to be seen as a frontrunner for LBS Bina’s upcoming projects under KITA@Cybersouth. MGB’s ongoing four projects under KITA@Cybersouth township makes up MYR194m or 23% of MGB’s internal outstanding construction orderbook. LBS Bina’s plan to launch 10 projects with a total GDV of MYR2.3bn in CY24 across the Klang Valley, Pahang and Johor should also benefit MGB’s job replenishment prospects.
Earnings forecast and valuation. No changes to our earnings estimates as earnings were within expectations. All in, our SOP-derived TP remains unchanged at MYR1.16 with the construction arm pegged to an unchanged target P/E of 12x (which we deem is justified amidst upcoming launches by LBS and growth in KSA’s housing sector). Our TP also bakes in a 0% ESG premium/discount based on MGB’s ESG score of 3.0.
Catalysts. With MGB’s precast venture in KSA taking off, in addition to the possibility of the company scoring more affordable housing jobs in Selangor beyond the current 7.2k units – we view its valuation to be undemanding as its 8x FY25F P/E is -1SD from its 5-year mean. Catalysts include developing new property projects in Johor as it already has two projects in the state – Laman Bayu (Batu Pahat) and Pangsapuri Saujana Indah (15km from Johor Bahru’s customs, immigration and quarantine complex).
Key risks include an unexpected slowdown in the property market and slower-than-expected precast orders in KSA.
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