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 2). We made no changes to our FY19–20 numbers while introducing FY21 earnings forecast at RM291.4mil.

• Mah Sing reported its FY18 revenue and net profit of RM2.19bil (-24.6% YoY) and RM271.6mil (-25.0% YoY) respectively. FY18 net profit of RM271.6mil is within our forecast but above consensus, constituting 103% and 109% of our and consensus full-year estimates respectively. The decline in revenue and profit was attributable to more new sales secured from new projects which have limited contribution during their initial stage of construction. FY18 EBIT margin remained stable at 16.3%, similar to FY17.

• Mah Sing recorded new sales of RM1.5bil for FY18, mainly secured from new launches in 2018 which were mostly priced below RM500,000. For FY19, management has revealed its sales target of RM1.5bil with its focus remaining on affordable homes at strategic locations. Unbilled sales of RM2.38bil (QoQ -RM2.5bil) will be progressively recognized over the next 3 years.

• Mah Sing’s balance sheet remained healthy with a net cash per share of 27 sen as of FY18. We believe the group is in a strong position to expand its landbank with a cash pile of more than RM1.2bil.

• Management proposed first and final dividend of 4.5 sen per share, representing a payout ratio of 40%. This translates to a yield of 4.5%. Based on our earnings projection, we expect the company to pay dividends of 4.7 sen for FY19, translating to a yield of 4.7%.

• 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).

Source: AmInvest Research - 28 Feb 2019