MGB Idaman housing project to boost earnings

by SHAFIQQUL ALIFF / graphic by TMR

MGB Bhd’s upcoming launches for “Rumah Selangorku” Idaman projects are expected to enjoy good uptake and the company group is expected to continue to benefit from economies of scale at its industrialised building system plant, which will be bolstered by construction orders from LBS Bina Bhd.

RHB Investment Bank Bhd stated that the price tag for the Idaman projects, which is around RM250,000 per fully furnished unit, is indeed affordable, based on the computation using the median multiple income technique of three times the annual median household income.

“The price of an affordable house in Selangor is circa RM262,800. Therefore, it is no surprise that all 1,312 housing units of the Idaman BSP (Bandar Saujana Putra) project launched in October last year are fully booked.

“MGB latest development in Molek is competitively priced at RM313,000 per unit, compared to the surrounding areas which have an average price tag of between RM280,000 and RM362,700 per unit as it is strategically located near multiple amenities such as hospitals, colleges and hypermarkets,” RHB stated in a report on the construction company yesterday.

The investment bank expects MGB’s upcoming fourth quarter of 2021 (4Q21) core earnings to come in at RM5.7 million, up 171% quarter-on-quarter, and maintained its full-year earning forecast for MGB at RM22 million.

The favourable outlook for MGB is underpinned by its construction activity levels, which have reached 80% of pre-Covid-19 levels, helped by the higher vaccination rates during the quarter.

RHB maintained a ‘Buy’ call on MGB with a lower target price of 99 sen from RM1.03 previously, given its robust earnings growth potential as it has lowered its target construction in the financial year 2022 price per earning to 13 times from 13.5 times.

“Overall, its RM1.88 billion outstanding orderbook and property development gross development value (GDV) of RM1.47 billion should provide earnings visibility over the next three years.

“Further support for its construction orderbook will come once the billings for the Kertih Bio-Polymer Park project in Terengganu kicks in. We have not imputed any contribution from the project amid the lack of details,” RHB added.

However, the bank noted that risks in the form of a sharp increase in input costs such as cement and steel, launch delays, a resurgence in Covid-19 cases, and management execution — and non-fulfillment — of conditions precedent in MGB’s proposed joint-venture agreement for Idaman.

MGB shares closed one sen higher at 74 sen yesterday, valuing the company for RM437.8 million.