MGB draws more attention to affordable housing stocks


MGB Bhd is the latest listed company with a focus on affordable housing to get coverage from research houses as the niche segment is “in vogue”, analysts said.

JF Apex Securities Bhd initiated coverage on MGB with a ‘Buy’ call and target price of RM1.15, saying it’s time to bring investors’ attention to the stock after the group’s successful transformation.

Its analyst Lee Chung Cheng said MGB has reinvigorated and repositioned itself as a niche contractor cum developer over the past two to three years, mainly targeting construction works in the affordable residential market segment in the Greater Klang Valley, and lesser extent of public amenity works, in lieu of competing for government’s mega infrastructure projects, which are scarce.

JF Apex added that the under-researched company deserves to be re-rated for reasons including sustainable business model for its residential market, and a sizeable outstanding construction orderbook of RM2.2 billion and a RM1.1 billion worth of property launches targeted for this year and next.

“MGB is serving a niche market with a high entry barrier as it commands cost advantage in constructing affordable housings, mainly leveraging its expertise in the industrialised building system (IBS).

“Its earnings are back to growth trajectory as it is expected to attain bottom-line growths of 117% and 118% year-on-year (YoY) for the financial year of 2021(2021F) and 2022F on the back of its top-line growths of 74.1% and 43.2% respectively,” Lee stated in a report yesterday.

He noted that MGB could easily achieve its target orderbook for this year judging by its track record as it successfully clinched RM1 billion worth of construction jobs in 2020.

MGB earlier proposed a 20% minimum dividend payout, which equates a dividend per share of 1.2 sen and 2.6 sen for 2021F and 2022F.

MGB has bagged several awards and contracts this year as the economy begins to reopen up while government restrictions slowly ease off in phases.

The group specialises in several scopes of business activities, design and build, project management, construction, IBS precast manufacturing and property development.

MGB, a subsidiary of LBS Bina Group Bhd, recently collaborated with the Selangor state government to develop and build more than 7,000 units of Rumah Selangorku Idaman by the first half of this year (1H21).

MGB said the affordable houses will be located in Shah Alam, Bandar Saujana Putra, Dengkil, Puncak Alam and Puchong and would use in-house IBS precast technology.

The group posted a revenue of RM181.6 million in its fourth-quarter for the financial year ended Dec 31, 2020, on the back of its construction projects resuming as well as its backlogs.

The company saw strong results from its progressive sales of Laman Bayu Phase 1 and 2, and unlocking and realising the delivery of Zenopy Residences.

Last week, AmInvestment Bank Bhd initiated coverage on Lagenda Properties Bhd, another affordable housing player, with a ‘Buy’ call on the counter and fair value of RM1.95 per share as its focus on affordable housing for civil servants will see it generating a stable net income in the years ahead.