Investment Highlights

• We maintain our BUY recommendation on Mah Sing with an unchanged fair value of RM1.21, based on a 40% discount to its RNAV (Exhibit 1). We made no changes to our FY18-20 earnings forecasts at RM264.5mil, RM276.2mil and RM288.4mil respectively.

• We recently met up with Mah Sing and was given updates on the company’s plan for 2019. We believe the outlook on Mah Sing remains positive in the mid to long term with the company’s clear direction towards affordable housing where the real demand is. Moreover, its quick turnaround business model limits its exposure to land withholding risks, resulting in better cash flow management.

• Mah Sing has lined up several launches in 2019 with the key selling points being: (1) affordability; and (2) strategic locations. In the central region, Mah Sing will roll out M Vertica Cheras Phases 3 & 4 (high-rise residential, starting price RM451K), M Centura Sentul Phase 2 (high-rise residential, starting price RM350K), Sensory Residence, Southville City KL (high-rise residential, starting price RM344K), Basil @ M Aruna, Rawang (landed residential, starting price RM550K) M Cahaya, Sungai Buloh (high-rise residential, starting price RM250K) and Icon City PJ Phase 2 (commercial).

• New projects in the northern region set to be launched in 2019 are Southbay City, Penang (high-rise residential, starting price RM600K) and Icon Residence, Georgetown Penang (high-rise residential, starting price RM1mil). Meanwhile in the southern region, Mah Sing will launch the Orchid and Hazel @ Meridin East, Johor (landed residential, starting prices RM450K and RM487K respectively).

• To recap, Mah Sing chalked up new sales of RM1.22bil on 9MFY18, and is on track to achieve its FY18 target of RM1.8bil. The sales were mainly secured from new launches in 2018 which were mainly priced below RM500K. Meanwhile unbilled sales of RM2.5bil will be progressively recognized over the next 3 years. Currently, Mah Sing has total landbank of 2,108 acres, with a GDV of RM24bil, which provides earnings visibility and will drive the company’s growth going forward.

• Mah Sing’s balance sheet remained healthy with net cash per share of 12 sen as of 9MFY18. We believe the group is in a strong position to expand its landbank with a cash pile of more than RM900mil.

• Mah Sing has a dividend policy of paying a minimum of 40% from its net profit since 2006. Based on our earnings projection, we expect the company to pay dividend of 4.4 sen and 4.5 sen for FY18 and FY19, translating into yield of 4.8% and 5.1% respectively. Its current share price offers potential upside of more than 30%, hence we maintain our BUY recommendation.

Source: AmInvest Research - 3 Jan 2019