Value has emerged in MKH, says AllianceDBS

KUALA LUMPUR: AllianceDBS Research believes the recent selldown on MHK Bhd on weak earnings delivery concerns have been overdone and the weak share price provides an attractive entry level for investors.

"Trading at 7x FY19 PE and 0.4x FY19 PB, MKH offers decent earnings visibility with record-high unbilled property sales that bucked the market trend, of which 30% is underpinned by recurring income from its young and mature plantation estate as well as steady portfolio of investment properties in Kajang/Semenyih," the research house said in its Wednesday report.

According to AllianceDBS, MKH's plantation estate in Indonesia has reached a prime age profile with a weighted average age of nine years. 

"The business is already self-sustaining with strong cash flow generation to pare down its USD borrowings which stood at USD57m, compared to USD85m as at end-Mar 2015," it said.

It added that MKH's investment properties in Kajang/ Semenyih continue to contribute resilient earnings despite the weak property market.

"MKH’s ~500 acres of landbank in Kajang/Semenyih carried at low cost will underpin its launch pipeline of affordably-priced properties going forward. 

"The completion of key infrastructure (RM62m flyover in Kajang 2 and Sg. Buloh-Kajang MRT line) which has been operational since Jul 2017 is expected to further enhance the appeal of itsproperty developments in Kajang/Semenyih," said the research house.

AllianceDBS maintained its buy call on the counter with a target price of RM1.70.