MGB: Strong Order Book and Future Prospects Drive ‘Buy’ Rating
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates that the company’s cumulative nine-month financial year (9MFY25) results were within market and consensus expectations, despite a notable decline in its third quarter (3QFY25) performance. The report highlights a significant new contract win in Saudi Arabia that is set to substantially boost its order book and secure earnings visibility for the coming years.
Performance Review
The company reported a 24.2% year-on-year (YoY) decline in 3QFY25 headline net profit, settling at RM12.3 million. When excluding non-recurring items, the core profit drop was slightly better at 21.7%. This quarterly dip was attributed to a transition period where new projects had yet to fully offset completed ones.
Revenue for 3QFY25 fell by 21.4% YoY, primarily due to a 32.7% YoY drop in property development revenue, impacted by the handover of completed units. The construction and trading segment also experienced a 12% decrease in revenue as several key projects neared completion, leading to a tapering off of progress billings.
Profit Before Tax (PBT) for 3QFY25 decreased by 16.7% YoY. This was largely due to lower overall revenue and increased costs incurred by its overseas subsidiary, which saw the construction segment’s loss before tax widen. However, this was partly mitigated by a stronger performance in its property development segment, where PBT improved by 40.7% YoY, driven by higher progress billings from ongoing projects.
Future Outlook and Strategic Growth
In a significant development, the company’s joint venture in Saudi Arabia secured a major contract for a residential development. The contract, valued between SAR350m and SAR400m (approximately RM388.5m to RM444.0m), is estimated to contribute about RM222m to the company’s attributable share.
This new project has bolstered the company’s total outstanding order book by 19.5% to an estimated RM1.35 billion, providing strong earnings visibility for the next 2-3 years. This represents the company’s largest overseas project to date, strengthening its foothold in the rapidly growing Middle East construction market. The project involves the construction of 440 apartment units, with construction scheduled to commence in March 2026 and complete within 30 months. This strategic move reinforces the company’s presence in Saudi Arabia and aligns with the Kingdom’s ambitious goal of achieving 70% homeownership by 2030.
Investment Recommendation
Given the robust order book, enhanced earnings visibility, and strategic expansion into a high-growth market, analysts maintain a positive outlook on the company. The recommendation is now a BUY, with a target price set at RM0.25.
