MGB Bhd: Keep Buy; Bucket In New Orderbook

MGB has secured a RM186m construction job from CI Medini Sdn Bhd to develop a 2-phased serviced apartment in Iskandar Puteri, Johor. This latest contract lifts FY25 YTD orderbook wins to RM381m, raising the outstanding orderbook to RM1.2bn, representing a healthy 2.1x cover of our FY25 construction sector revenue forecast. As the contract was secured from an external client, we expect margins to be lower than MGB’s usual high-rise construction projects, driven by the lack of related-party cost synergies and heightened construction pricing competition in the crowded Johor’s property market. We expect MGB to remain on track to achieve our FY25 orderbook replenishment target, supported by upcoming LBS Bina’s planned RM2.6bn GDV worth of property launches in 2HFY25 and potential contributions from its own pocket land developments in Puchong and Cameron Highlands. Besides, MGB’s first deal with Creed Group could pave the way for future wins from CI Medini’s multi-phase Iskandar Puteri projects, diversifying its client base and strengthening revenue resilience. As the win is within our orderbook assumption, we maintain our valuation. We reiterate our BUY call with an unchanged SOP-derived TP of RM1.09, valuing the construction division at 11x FY25E EPS and the property segment at a 40% discount to RNAV.

Contract details.

MGB’s wholly-owned unit, MGB Construction and Engineering Sdn Bhd has secured a RM186m contract from CI Medini Sdn Bhd to build serviced apartments in Iskandar Puteri, Johor. The contract to be conducted in two-phase with the phase 1 entails a 32-storey tower comprising 405 units, a seven-storey podium car park, and facilities on the eighth floor, with construction slated to commence on 1 Sept 2025 and targeted for completion in Nov 2027. While for phase 2, it involves a 31-storey tower with 397 units, scheduled for delivery within 18 months from its yet-to-be-confirmed start date.

Healthy orderbook.

With this latest win, MGB’s YTD job wins total RM381m, boosting its orderbook to RM1.2bn, translating into a 2.1x our FY25 construction revenue forecast, enhancing its earnings visibility. As the contract was secured from an external client rather than parent company LBS Bina, we expect project margins to be lower than those of MGB’s typical high-rise residential jobs, given the lack of related-party cost synergies and heightened construction job pricing competition in Johor’s crowded property market.

Our takes.

With MGB’s YTD orderbook replenishment stood at RM381m (versus our FY25 assumption of RM700m), we believe MGB is on track to secure the remainder, driven by steady inflow of in-house projects, with LBS Bina targeting over RM2.6bn worth of property launches in 2HFY25 and potential contributions from MGB’s own pocket land developments, including a 670-unit condominium project in Puchong (GDV: RM271m) and a 324-unit apartment project in Cameron Highlands (GDV: RM107m). Besides, we view this maiden engagement between MGB and Creed Group (the owner of Cl Medini) as strategically important, as it potentially open the door for MGB to repeat job wins from CI Medini’s sizeable development pipeline in Iskandar Puteri (multi-phases) in the future. This external client diversification could reduce reliance on LBS-related projects, improving revenue mix resilience.

No changes to our forecast.

We maintain our FY25-26 earnings forecasts and RM700m order book replenishment target, as the latest contract win is within our expectations. We continue to like MGB for its focus on affordable housing and healthy construction order book, complemented by its expertise in IBS solutions.

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Recommendation Rating

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Mercury Securities has the following recommendation rating:

BUY

Stock’s total return is expected to be +10% or better over the next 12 months (including dividend yield)

HOLD

Stock’s total return is expected to be within +10% or -10% over the next 12 months (including dividend yield)

SELL

Stock’s total return is expected to be -10% or worse over the next 12 months (including dividend yield)