Investment Highlights

• We maintain our BUY recommendation on Mah Sing Group (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 earnings forecasts.

• We recently met up with Mah Sing for updates on the company’s plan for 2H2019. The company will maintain its strategy of a quick turnaround business model for the short to medium term. Such business model limits its exposure to land withholding risks, resulting in better cash flow management.

• We believe the outlook on Mah Sing remains positive with the company’s clear direction towards quick turnaround projects and affordable housing at strategic locations where the real demand is. A good example of Mah Sing’s quick turnaround business model is the upcoming M Oscar @ Kuchai Lama Project in 3QFY19 (GDV RM500mil, high-rise residential, starting price RM428K) whereby the land was acquired in March 2019. Management planned to have similar land banking and quick turnaround projects in the future.

• Other new projects set to be launched in 2H2019 (Exhibit 2) are Southbay City, Penang (high-rise residential, starting price RM600K). Meanwhile in the southern region, Mah Sing will launch the Orchid @ Meridin East, Johor (landed residential, starting price RM463K).

• Mah Sing has made launched several projects in 1H2019 with the key selling points being: (1) affordability; and (2) strategic locations. These launches were well received and saw average take-up rates of at least 80%.

• In the central region, Mah Sing has rolled out M Vertica Cheras (87%) Phases 3 & 4 (high-rise residential, starting price RM451K), Sensory Residence, Southville City KL (high-rise residential, starting price RM344K), Basil @ M Aruna (88%), Rawang (landed residential, starting price RM550K) M Cahaya, Sungai Buloh (high-rise residential, starting price RM250K) and Icon City PJ Phase 2 (commercial). Meanwhile in the southern region, Mah Sing launched the Hazel @ Meridin East (98%), Johor (landed residential, starting price RM487K).

• To recap, Mah Sing chalked up new sales of RM300.5mil in 1QFY19, and is maintaining its FY19 target of RM1.5bil whereby 50% of the properties are priced below RM500K. Meanwhile, unbilled sales of RM1.58bil will be progressively recognized over the next 3 years. Currently, Mah Sing has total landbank of 2,108 acres with a GDV of RM25bil, which provides earnings visibility and will drive the company’s growth going forward.

• Mah Sing’s balance sheet remains healthy with net cash per share of 29 sen as of 1QFY19. 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 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 4.5 sen, 4.7sen and 4.9 sen for FY19, FY20 and FY19, translating into yield of 4.9%, 5.2% and 5.3% respectively. As the current share price offers potential upside of more than 30%, we maintain our BUY recommendation.

Source: AmInvest Research - 19 Jul 2019