MB World a ‘buy’ with Rapid development
PETALING JAYA: Hong Leong Investment Bank (HLIB) Research has initiated coverage on MB World Group Bhd with a “buy” call and a target price of RM2.75, offering a 32.2% upside from its current price.
The group’s share price was up 12 sen to RM2.20 today with 129,100 shares traded.
MB World, formerly known as Emas Kiara Industries Bhd, is mainly involved in property development and geotechnical engineering services.
In a note today, HLIB Research said it sees the group as the proxy for Petronas’ Refinery and Petrochemical Integrated Development (Rapid) expansion, given that its maiden township project is benefiting from the growth potential and spill-over effects from both developments in Pengerang and Desaru Coast.
Bucking the lacklustre trend of overall property market, the research house said MB World was able to achieve an overall take-up of more than 80% within a year after the launch of its projects, thanks to its first mover advantage.
Besides the key selling point of close proximity to Pengerang and Rapid projects, HLIB Research said the location also provides the residences a safe distance from the risk of severe environmental impact and pollution in Pengerang.
“Besides, the project is expected to fetch an attractive rental yield in the range of 6%-10% drawing the inference from the rental rate in the neighbour township,” it added.
In addition, HLIB Research said the group is a rising property player in Johor with a total gross development value of RM3.5 billion to be developed for the next 10 years.
The research house said the group’s revenue is expected to rise by three-years compound annual growth rate of 139% in anticipation of continue strong new sales in FY18 and FY19, having achieved about RM566 million sales (excluding Pinnacle Tower project) in FY17.
Furthermore, it said the sustainability of earnings is supported by the unbilled sales of RM275 million as of Q3 FY17 and healthy margin given its low land cost.
“We forecast FY17 and FY18 core earnings at RM27 million (up 70% y-o-y) and RM44 million (up 64% y-o-y), respectively,” it added, noting there is a potential increase in dividend following the projected high earnings growth.
Source: The Sun Daily