MCT unbilled sales should give earnings visibility for next three years

MCT Bhd (Nov 15, 71 sen)

Maintain neutral with a lower target price (TP) of 75 sen: MCT Bhd’s fifth quarter for its financial year ending Dec 31, 2018 (5QFY18) core net profit of RM20.3 million was within our expectations. 

Revenue rose 33.8% year-on-year (y-o-y), mainly from Lakefront@Cyberjaya and Cybersouth projects. Meanwhile, net profit surged by 92.4% y-o-y on higher margins, which in turn were due to construction cost savings from Lakefront Homes and Residences. Note that the company recently changed its financial year end to Dec 31, 2018, from June 30, 2018.

Skypark@Cyberjaya was completed and handed over in July. Liquidated and ascertained damages stood at RM500,000 for Casa Green and Casa View at Cybersouth and Lakefront Residences. We expect these projects to be handed over by the end of this year.

As at September, total unbilled sales fell to around RM1.1 billion due to the lack of new launches. The current unbilled sales should provide earnings visibility over the next two to three financial years for the group. MCT’s new sales in 5QFY18 slightly recovered to RM113 million versus RM70 million in the preceding quarter.

With the challenging property market, the group has held back its pipeline launch, namely The Place 2 mixed development project in Cyberjaya. The project has a total gross development value (GDV) of RM1.08 billionn and is located next to Cyberjaya City Centre, within walking distance of Limkokwing University of Creative Technology.

The group recently completed its landbanking exercise to acquire 5.61 acres (2.27ha) and 3.52 acres of land in Bandar Damansara, Petaling Jaya, Selangor from Tropicana Golf & Country Resort. With the additional proposed acquisition of 1.765 acres in August 2018 in the same area, it will have land with a total GDV of RM892 million in Persiaran Tropicana.

Management has guided that the company will build its brand as a quality property developer, with a diverse mix of products ranging from affordable homes to luxury properties in exclusive neighbourhoods.

We make no change to our forecasted earnings, but adjust them accordingly to the new financial year end. Having said that, with the uncertainty in the property market, we cut our TP to 75 sen based on a higher discount to revised net asset value of 55% (from 50%). — RHB Research Institute, Nov 15

This article first appeared in The Edge Financial Daily, on Nov 16, 2018.

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