Investment Highlights

• We maintain our BUY call on Mah Sing Group (Mah Sing) with an unchanged fair value of RM1.13 per share, based on a 45% discount to its RNAV (Exhibit 2). We made no changes to our FY19–21 net profit forecasts.

• Mah Sing reported its 9MFY19 revenue and net profit of RM1,347.1mil (-19.7% YoY) and RM155.3mil (-24.4% YoY) respectively. Stripping off distribution to perpetual sukuk/ securities amounting to RM64mil, 9MFY19 core net profit of RM91.4mil (-37.7% YoY) came in within our expectations but below consensus at 67% and 58% our and consensus fullyear estimates. Despite making up 67% of our full-year forecast, we reckon this to be in line with our expectation, as we expect stronger earnings in 4QFY19 with higher revenue recognitions.

• The decline in revenue and profit was mainly due to new projects which have limited contribution during their initial stages of construction. Management indicated stronger earnings in the coming quarters with higher revenue recognitions once the construction momentum starts to pick up. 9MFY19 revenue was mostly from: (i) M Vertica, M Centura, M Aruna, Southville City, Lakeville Residence, D’sara Sentral, M Residence and M City Jalan Ampang in Greater KL and Klang Valley; (ii) Ferringhi Residence in Penang and (iii) The Meridin@Medini, Meridin East and Sierra Perdana in Johor.

• On a positive note, Mah Sing is on track to meet its 9MFY19 target for new sales of RM1.136bil, (75% achieved for FY19 RM1.5bil target ), 20.6% higher compared to YoY. Almost 50% are made up of properties priced below RM500K. Meanwhile, unbilled sales of RM1.71bil (QoQ: RM1.65bil) will be progressively recognized over the next 3 years.

• Mah Sing’s balance sheet is healthy with net cash per share of 21 sen as of 9MFY19 (vs. QoQ’s 32 sen). We believe the group is in a strong position to expand its landbank with a cash pile of more than RM1bil.

• To recap, Mah Sing has acquired 3 prime lands in KL earlier this year, namely M Oscar (Kuchai Lama, next to Happy Gardens), M Luna (Kepong) and M Adora (Wangsa Melawati). All three projects are targeted towards the affordable segment at strategic locations with a starting price of below RM500K.

• The first phase of M Oscar (200 units) achieved a take-up rate of 100% during its initial launch in October 2019. Meanwhile both M Luna and M Adora are targeted to be launched in 1QFY20.

• We believe the long-term outlook for Mah Sing remains positive backed by strong sales achieved in the past few quarters. Moreover, we expect recent acquisitions to be strong sellers given their strategic locations and attractive pricing. Maintain BUY recommendation.

Source: AmInvest Research - 28 Nov 2019