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 1). We made no changes to our FY19–21 net profit forecasts.

• We recently met up with Mah Sing for updates on the company’s plan for 2020. Mah Sing is targeting new sales of at least RM1.5bil in FY20 (FY19: RM1.5bil). The company has also lined up several launches for 2020 with a combined GDV of RM1.8bil which is 80% higher than FY19’s RM1.0bil. About 75% of this year’s launches will be concentrated in the central region of Peninsular Malaysia with the key selling points being: (1) affordability; (2) strategic locations; and (3) good connectivity.

• In the central region, Mah Sing will roll out M Luna, Kepong (high-rise residential, starting price RM385K, GDV of RM146mil); M Adora, Wangsa Melawati (high-rise residential, starting price RM468K, GDV of RM208mil); the new phase of M Vertica, Cheras (high-rise residential, starting price RM480K, GDV of RM322mil); Sensory 2 & Cerrado 2, Southville City KL (high-rise residential, starting price RM450K, GDV of RM80mil); and M Centura/ M Arisa, Sentul (high-rise residential, starting price RM299K, GDV of RM322mil).

• In the northern region, this year will see the launch of Ferringhi Residence 2, Batu Ferringhi, Penang (high-rise residential, starting price RM1mil, GDV of RM183mil). Meanwhile in the southern region, Mah Sing will launch the Acacia, Meridin East, Johor (landed residential, starting prices RM498K, GDV of RM215mil).

• To recap, Mah Sing chalked up new sales of RM1.136bil in 9MFY19, and is on track to achieve its FY19 target of RM1.5bil. The sales were mainly secured from new launches in 2019 which were mainly priced 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, unbilled sales of RM1.7bil will be progressively recognized over the next 3 years. Currently, Mah Sing has total landbank of more than 2,000 acres, with a GDV of RM24bil, which will provide earnings visibility and drive the company’s growth going forward.

• Mah Sing’s balance sheet remains healthy with net cash per share of 21 sen as of 9MFY19. We believe the group is in a strong position to expand its landbank with a cash pile over RM1bil. Mah Sing is also planning to redeem RM540mil (@6.8% p.a.) worth of perpetual sukuk in FY20 which will be financed via bank borrowings. We reckon the redemption of this perpetual sukuk and its conversion into conventional loan will provide savings of about RM10mil per year.

• We believe the long-term outlook for Mah Sing remains positive backed by strong sales achieved in the past few quarters. Moreover, we expect the upcoming launches to be well received given their strategic locations and attractive pricing. Maintain BUY recommendation as its current share price offers potential upside of more than 60%.

Source: AmInvest Research - 15 Jan 2020