MGB Berhad (MGB) remains a compelling investment opportunity, driven by its diversified growth drivers across construction, property, pre-cast business, and industrial park development. Following a recent results briefing, analysts have maintained a BUY recommendation on the stock, with a revised target price of RM1.20, reflecting a potential upside of approximately 41% from its current price of RM0.85.

The positive outlook for MGB is underpinned by several key factors. The company has secured a substantial pipeline of affordable housing projects, including a conditional share purchase agreement for a 32-acre plot in Taman Putra Prima, Puchong. This land will be used to develop an affordable housing project under the Rumah Selangorku 3.0 (RS3) initiative, projected to have a gross development value (GDV) of RM399 million and comprising 1,980 units. This addition could increase MGB's portfolio of affordable homes to 9,190 units, up from the current 7,210 units. Additionally, part of the land may be used for a high-rise project with an estimated GDV of RM271 million, also expected to launch in 3Q25.

MGB's joint venture with Terengganu Incorporated to develop the Kertih Terengganu Industrial Park (KTIP) further bolsters its growth prospects. Spanning 780 acres with an estimated GDV of RM747 million, the project is progressing with two out of seven development orders approved as of end-June. This venture could significantly benefit from strong land sales enquiries and the potential appointment of MGB as a design-and-build contractor for manufacturing facilities.

In the pre-cast segment, MGB's Saudi Arabian business has secured approximately 64,000 cubic metres of pre-cast concrete orders, approaching its first-year target of 90,000 cubic metres. Analysts anticipate that order volumes will increase by the end of FY24, with MGB's facility being the largest among the three serving Jeddah and Makkah. The company aims to expand its role in design-and-build projects for apartments, in addition to its pre-cast component supply and installation.

Earnings forecasts have been revised upwards, with FY25-26F earnings increased by 3% and 10%, respectively. This adjustment accounts for the new property projects in Puchong and a higher pre-cast volume target, now set at 110,000 cubic metres in FY25. The updated SOP-derived target price of RM1.20 reflects a slight increase from the previous RM1.16 and includes no ESG premium.
Source: RHB
Title: Various Growth Drivers In Place; Stay BUY