MGB Berhad's property segment continues to demonstrate robust performance, bolstered by strong progress in affordable housing projects. RHB Investment Bank Bhd (RHB Research) has reiterated a BUY call on the company with a target price of RM1.20, representing a 56% upside. The research house views MGB's consistent earnings growth and strong property sales as key drivers, maintaining earnings estimates amidst favourable developments.

MGB's nine months of 2024 (9M24) core profit surged by 15% year-on-year (YoY) to RM41.5 million, meeting 74% of RHB Research's full-year forecast and 71% of consensus estimates. The stellar performance was underpinned by the property development arm, which recorded over 100% YoY growth in profit before tax (PBT) due to higher unit sales and steady progress in projects such as Idaman Melur (99.1% sold), Idaman Cahaya (93.3%), and Idaman Sari (98.8%).

In contrast, the construction division saw an 80% YoY decline in PBT, impacted by the completion of key projects like Kita Mekar and Alam Perdana. Additionally, the group incurred initial costs related to its precast operations in Saudi Arabia.

The group's order book stood at RM1.2 billion as of the third quarter of 2024, comprising projects including contracts worth RM442 million linked to LBS Bina Group's township, KITA@Cybersouth. Future contributions are expected from other LBS projects, such as Alam Perdana, which has RM1.3 billion in unlaunched gross development value (GDV).

Meanwhile, MGB's precast venture in Saudi Arabia is gaining traction, offering additional growth potential.

Looking ahead, MGB is projected to achieve a 16% earnings growth for FY24, driven by continued progress in its Rumah Selangorku Idaman projects with a combined GDV of approximately RM1.3 billion. The company's valuation remains attractive, with its FY25 forward price-to-earnings ratio of 7x sitting below the five-year average.

Other growth catalysts include upcoming developments in Johor, such as Laman Bayu in Batu Pahat and Pangsapuri Saujana Indah near Johor Bahru, alongside a faster-than-anticipated rollout of the Kertih Terengganu Industrial Park, which holds an estimated GDV of RM747 million.

Despite these promising prospects, key risks include potential delays in project launches or an unexpected slowdown in the property market. Nevertheless, RHB Research remains optimistic about MGB's position in the affordable housing and construction sectors, supported by a solid pipeline of projects and improving operations abroad.