MGB earnings poised for growth on Rumah Idaman projects


MGB Bhd is expected to achieve strong revenue and earnings growth over the next two years backed by its Rumah Idaman affordable homes projects.

RHB Research Institute Sdn Bhd has a ‘Buy’ call on the construction and engineering company with a higher target price of RM1.02 from 82 sen. “While our investment thesis is largely maintained, we now expect a stronger FY20 forecast (FY20F) to FY22F net earnings compound annual growth rate of 158%, from 99% previously.

“Upcoming launches for the Rumah Idaman projects should sell like hotcakes, given its comparatively better location and attractive pricing of RM250,000 per fully furnished unit. MGB’s expertise in building affordable homes could garner it more Rumah Idaman-related projects ahead,” it said in a research note yesterday.

The research firm raised MGB’s FY20F headline profit by 3% to RM13.6 million after tweaking progress billing and margin assumptions.

It, however, slashed MGB’s FY20F core net earnings by 22% after imputing the cumulative nine-month period of extraordinary items which primarily stemmed from the gain from disposal of personal protective equipment under the hospitality business in the second quarter of 2020 (2Q20) which was RM2.93 million.

“We expect 4Q20 core net profit at RM5.2 million (up 58% year-on-year) given minimal disruptions to business operations in the quarter observed,” it said.

Despite lowering MGB’s FY20F core earnings by 22%, the firm lifted its FY21F and FY22F net profit by 1% and 31% respectively.

RHB Research shortened the project period for the Rumah Idaman projects with majority billings to be recognised in three years and imputed higher FY21F-FY22F tax rate assumptions.

It also expects RM600 million worth of construction contract awards for the group from LBS Bina Group Bhd, in line with management’s guidance.

MGB is anticipated to make further announcements in the coming weeks in relation to approvals from

State Executive Council Meeting (MMKN) and Selangor Housing Real Estate Board (LPHS) for the Rumah idaman projects.

The builder recently announced MMKN has approved its application to convert and build 1,853 and 513 Rumah Idaman units for the Idaman Cahaya and Idaman Sari developments, via a letter dated Jan 29, 2021, issued by LPHS.

MGB’s share price has climbed 54% or 33 sen year-to-date from 61 sen. It ended six sen or 6.82% higher at 94 sen yesterday, valuing the company at RM471.55 million.