PETALING JAYA: Affordable housing is expected to be MGB Bhd
’s key earnings driver following the government’s initiatives to encourage home ownership, says Mercury Research.
MGB has launched five affordable housing projects out of the six that it had secured so far, with a total combined gross development value (GDV) of RM2bil.
The projects have achieved a strong take-up rate of over 90%, according to the research house.
“In our view, potential policy changes, such as the Real Estate and Housing Developers’ Association Malaysia proposal to establish a national trust for building affordable housing, could be a game changer for niche construction companies such as MGB,” it said.
Meanwhile, MGB’s latest outstanding order book amounted to RM1.3bil, which represented a healthy cover of 1.5 times financial year 2023’s construction revenue.
In the year-to-date period, Mercury Research noted that the group has secured two new projects from LBS Bina totalling RM396mil – on track to meet its annual order book replenishment target of between RM400mil and RM600mil.
Apart from housing, MGB is also looking to secure some jobs from other types of government projects, including schools and housing quarters.
In its initiation coverage note, the research house highlighted MGB’s efforts to work with the Terengganu state government, Malaysian Investment Development Authority and the Bank of China to secure potential buyers for its industrial park development in Kemaman, Terengganu with an estimated GDV of RM680mil.
“After deducting the state government’s 14% cut and assuming a 20% pre-tax profit margin, we estimate this venture could contribute up to RM100mil to MGB’s earnings when all seven plots of land are fully sold,” the research house said.
The construction company is initiated with a “buy” rating at a target price of RM1.18 per share.
