MGB Berhad: A Rare Blend of Profitability and Executive Confidence

The construction sector has long been a barometer of economic resilience, and within Malaysia's bustling market, MGB Berhad (KLSE:MGB) stands out as a quietly compelling story. Over the past three years, the company has demonstrated a rare combination of accelerating earnings momentum, margin discipline, and strategic insider alignment. For investors seeking a stock that balances proven profitability with executive confidence, MGB's trajectory offers a compelling entry point—before the market fully recognizes its value.

A Turnaround Anchored in EPS Growth
MGB's recovery from a 2022 earnings slump has been nothing short of dramatic. After posting an EPS of RM0.025 in 2022—a 52% drop from the prior year—the company staged a remarkable comeback in 2023, nearly tripling its EPS to RM0.081. This upward momentum continued in 2024, with EPS rising a further 23.5% to RM0.10. While this growth rate lags the broader construction sector's 32.1% annual earnings expansion, MGB's consistency is notable: three straight years of double-digit EPS growth, averaging a 30% compounded annual growth rate (CAGR) since 2022.

This rebound isn't merely a post-pandemic bounce. Quarterly data reveals sustained progress: each year since 2022, MGB's quarterly EPS has outperformed the prior year's comparable quarter, signaling operational stability. Even as revenue fell short of expectations in 2024, the company's ability to lift profitability underscores its focus on cost efficiency.

Margin Improvements Signal Operational Excellence
While EPS growth grabs headlines, MGB's margin trends tell an equally compelling story. The company's EBIT margin has nearly doubled since 2022, rising from 4.67% to 7.99% by 2024. This improvement, driven by better project execution and cost management, has outpaced industry peers. For instance, the March 2025 TTM EBIT margin of 7.37% (versus 4.67% in 2022) reflects a deliberate shift toward higher-margin contracts.

Critically, these margins have held steady even as revenue growth slowed. A net profit margin climb to 5.8% in 2024 (from 5% in 2023) further validates management's discipline. For a construction firm, where volatility is the norm, this consistency is a competitive moat.

Insider Ownership: A Vote of Confidence
What truly distinguishes MGB is its 17% insider ownership, a rare feat in Malaysian equities. Executives and board members holding nearly one-fifth of the company's shares send a clear signal: they're not just managing MGB—they're betting on it. This alignment is particularly striking in a sector where short-term incentives often conflict with long-term value creation.

Insider ownership isn't just about skin in the game; it's about decision-making. MGB's shift toward infrastructure projects—such as affordable housing and greenfield developments—aligns with Malaysia's growth priorities. The company's recent foray into sustainable construction materials, for instance, positions it to capitalize on government stimulus programs, a trend likely to accelerate post-election.

Why Now is the Time to Act
MGB's stock price remains undervalued relative to its fundamentals. At current levels, the stock trades at a forward P/E of 15x, well below its five-year average of 18x. Meanwhile, its strong free cash flow (RM28 million in 2024) and dividend increases (up to RM0.015 per share) suggest management is prioritizing shareholder returns.

The risks? Construction remains cyclical, and delays in government projects could pressure margins. Yet MGB's margin resilience and insider commitment argue for a higher risk-adjusted return.

Final Analysis: A Hidden Gem Poised to Shine
MGB Berhad is a textbook case of a company turning the corner: it has delivered a 30% EPS CAGR over three years, improved margins by over 60%, and secured executive buy-in through significant shareholdings. For investors, this blend of profitability, margin discipline, and insider alignment makes MGB a compelling contrarian play.

The stock's current valuation leaves room for appreciation as the market catches up to its story. With Malaysia's construction sector set to benefit from infrastructure spending and urbanization, MGB's focus on high-margin projects and sustainable growth could drive outperformance. Investors should consider a position in MGB before its story becomes widely recognized—and its valuation fully reflects its potential.