Investment Highlights

• We maintain our BUY call on Mah Sing Group (Mah Sing) with an unchanged fair value of RM0.79 per share, based on a 60% discount to its RNAV (Exhibit 1). We make no changes to our FY20–22 net profit forecasts.

• We recently spoke to Mah Sing, who updated us on its latest development and the impact of the movement control order (MCO) and Covid-19 to the company’s business. It is worth noting that Mah Sing has contributed RM4.2mil to the fight against Covid-19. These contributions include 20 units of heavyduty critical-care ventilators worth RM3.9mil to the National Disaster Management Agency (Nadma), which will be distributed to hospitals in need; and RM300K worth of personal protective equipment (PPE) for medical frontliners.

• The progress of all its projects is on schedule prior to the MCO. Management emphasized that post-MCO, work shifts of construction jobs will need to be increased to clear backlogged work due to the MCO. On a positive note, Mah Sing has received new bookings worth of RM37mil via its digital platforms (website and mobile app) during the MCO period. The company is maintaining its sales target of RM1.6bil in FY20.

• Mah Sing has redeemed its RM540mil (6.8%) perpetual sukuk while at the same time, issued RM600mil new Islamic mediumterm notes (sukuk murabahah) at 4.35% per annum. We reckon that this conversion will provide savings of about RM13mil per year. Meanwhile, we believe the group is in a strong position to expand its landbank with a cash pile of more than RM1bil. The company’s unbilled sales of RM1.73bil will be progressively recognized over the next 3 years. Mah Sing has proposed a 3.35 sen dividend for FY19, translating into a yield of 7.4%.

• The company has also lined up several launches post-MCO, with a combined GDV of RM1.8bil with the key selling points being: (1) affordability; (2) strategic locations; and (3) good connectivity. 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).

• We make no changes to our FY20–FY22 earnings forecasts at this juncture. To recap, we have cut our FY20–FY21 earnings by 5.2% and 3.9% respectively in our previous sector report dated 9 April 2020 to reflect the impact of the MCO and its spillover effects to the economy which may result in lower revenue recognition. We believe the longterm outlook for Mah Sing remains positive backed by strong sales achieved in the past few quarters. Moreover, we expect the new launches in Klang Valley to be strong sellers given their strategic locations and attractive pricing. We viewed the recent selldown on the stock as a buying opportunity with an undemanding P/BV of 0.2x and a potential upside of more than 70%, hence we are maintaining our BUY recommendation.

Source: AmInvest Research - 21 Apr 2020