MGB through its subsidiary, Prisma Kasturi SB (PKSB), has entered into joint venture agreements (JVAs) with Talam Transform Bhd (Talam) and Kandis Permai SB (KPSB) to undertake a mixed development and a residential project on 26 acres of land in Taman Bukit Serdang, Seri Kembangan, with a combined gross development value (GDV) of RM861.3m. Assuming low-teen margins and a corporate tax rate of 24%, these property developments are expected to contribute approximately 6% per annum to the Group’s earnings. Pending approvals and the fulfilment of the conditions , we keep our forecast unchanged for now. We maintain our Outperform call on MGB, with an unchanged SOTP derived TP of RM1.16.

• JVA with Talam details. PKSB entered into a JVA with Talam to develop 16.5 acres of land for a mixed development project that includes commercial shop lots and affordable housing under the Rumah Selangorku scheme. Under the JVA, Talam will obtain the necessary approval from the government authorities for the development project and receive twelve percent (12%) of the total net sales value of the commercial units. The GDV of the JVA is estimated to be RM388.6m.

• JVA with KPSB details. PKSB has also signed a deal with KPSB to develop 9.5 acres of Malay reserved land in the area into residential units exclusively for Bumiputera homeowners. Under the JVA, KPSB will be entitled to 8.2% of the total net sales value of the units. The GDV of the project is estimated to be RM472.8m.

• Our take. Overall, we are positive as these projects are expected to contribute approximately 6% per annum to the Group’s earnings, deriving two income streams from the construction and property development throughout the duration of the proposed projects. However, we make no adjustment to our earnings estimates pending approvals and the fulfilment of the condition under the JVAs.

Source: PublicInvest Research - 11 Oct 2024