Investment Highlights

• We maintain BUY on Mah Sing with an unchanged fair value of RM1.22, based on a 40% discount to its RNAV (Exhibit 2). We made no changes to our FY19–21 numbers.

• Mah Sing reported its 1QFY19 revenue and net profit of RM450.3mil (-23.0% YoY) and RM55.0mil (-14.3% YoY) respectively. Stripping off distribution to perpetual sukuk amounting to RM18.3mil, 1QFY19 core net profit came in at RM36.7mil (-20.0% YoY). Despite making up 19% and 16% of our and consensus full-year estimates, we reckon this to be within expectations as we expect Mah Sing to recognise stronger revenue in the coming quarters once its projects pass the initial stages of construction.

• The decline in revenue and profit was attributable to more new sales secured from new projects which have limited contribution during their initial stages of construction. 1QFY19 EBIT margin was stable at 16.6%, vs. YoY’s 15.1%.

• Mah Sing recorded new sales of RM300.5mil for 1QFY19, mainly secured from new launches in 2018 which were mostly priced below RM500,000. The company will maintain its sales target of RM1.5bil for FY19, with its focus remaining on affordable homes at strategic locations. Unbilled sales of RM1.58bil (QoQ -RM2.38bil) will be progressively recognized over the next 3 years.

• Mah Sing’s balance sheet is healthy with a net cash per share of 29 sen as of 1QFY19 (vs. QoQ’s 27 sen). We believe the group is in a strong position to expand its landbank with a cash pile of more than RM1.28bil.

• 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).

• Meanwhile the recently acquired 4.63-acre landbank at Mukim Petaling in March 2019 will be developed into a residential condominium with an estimated GDV of approximately RM500mil. The development is targeted towards the affordable segment with indicative prices starting from RM428K per unit and built-up from 700 sq ft, comprising two to four bedrooms. This project is expected to commence in the 2H2019 and to be developed over a span of 4–5 years.

Source: AmInvest Research - 31 May 2019