PETALING JAYA: Construction and property developer MGB Bhd is seeing higher progress billings from the contracts it is undertaking.
Coupled with a more conducive labour market and manageable raw material costs, MGB’s core profit for the first quarter of financial year 2024 (1Q24) could rise between 18% and 28% year-on-year, said RHB Research.
“We see core profit potentially reaching RM14mil to RM15mil (versus 1Q23 core profit of RM11.8mil).
“Looking ahead, we envisage better progress for existing jobs at the KITA@Cybersouth and Idaman projects to drive financial year 2024 (FY24) earnings growth,” the research firm added.
It estimates MGB’s latest outstanding order book at circa RM1.2bil, taking into account the latest job win worth RM207mil for D’Island Residence in March, which translates into earnings visibility over the next two years.
According to the research firm, parent LBS Bina Group Bhd plans to launch 10 projects with a total gross development value of RM2.3bil in FY24.
The group’s land bank of circa 2,767 acres should also provide upcoming construction opportunities for MGB in the long run.
On its first precast venture in Saudi Arabia worth about RM119.5mil, which it clinched in February, RHB Research understands that the company is finalising the precast sample and supply of precast elements.
The contract is to supply around 60,000 cubic m of precast concrete products for 400 units of villas for the Al-Arous development in North Jeddah.
The research firm also said MGB is likely to clinch more affordable housing projects in Selangor.
Given these, the research firm believes the stock’s current valuations at 7.6 times FY25 price-earnings are undemanding.
Catalysts include developing new property projects in Johor, as MGB already has two projects there – Laman Bayu (Batu Pahat) and Pangsapuri Saujana Indah.
Key risks to the research house’s “buy” call include slower property launches and sluggish precast purchase orders.
RHB Research has upped the stock’s target price to RM1.16 from RM1.13 previously.