Investment Highlights

• We maintain our BUY call on Mah Sing Group (Mah Sing) with a higher fair value of RM1.01 per share (from RM0.79), based on a 50% discount to its RNAV (Exhibit 2). We have reduced our discount to RNAV to 50% from 60% as a result of strong take-up rates in several of its recent launchings. We cut our FY20 net profit forecast by 18.7% while increasing FY21–22’s by 8.6%–8.2% to reflect the timing of recognition.

• Mah Sing reported a 1HFY20 revenue and net profit of RM669.8mil (-28.1% YoY) and RM45.3mil (-53.8% YoY) respectively. Excluding the exceptional items of impairments and assets written off amounting to RM14.5mil and distribution to perpetual sukuk/ securities (RM45.6mil), it posted a 1HFY20 core net profit of RM14.2mil (-76.4% YoY).

• The decline in revenue and profit was mainly due to new projects that have limited contribution during their initial stages of construction and the impact of the movement control order (MCO) amidst the Covid-19 pandemic. Management said it expects stronger earnings in 2HFY20 with higher revenue recognitions once the construction momentum picks up. 1HFY20 revenue was mostly derived from: (i) M Vertica, M Centura, M Aruna, Southville City, Lakeville Residence and D’sara Sentral in Greater KL and Klang Valley; (ii) Ferringhi Residence in Penang; and (iii) The Meridin@Medini, Meridin East and Sierra Perdana in Johor.

• Mah Sing chalked up new sales of RM418.6mil for 1HFY20 while unbilled sales of RM1.64bil (QoQ: RM1.69bil) will be progressively recognized over the next 3 years. It has reduced its FY20 sales target to RM1.1bil from RM1.6bil. Meanwhile,

• To recap, Mah Sing has launched several key projects in the past 10 months, namely M Oscar (Sri Petaling) in October 2019, M Luna (Kepong) in June 2020 and M Adora (Wangsa Melawati) in July 2020. These projects are well received with take-up rates of 64% for M Oscar South Tower; 85% for M Luna Tower A (860 units); and 82% for M Arisa (Phase 1 & 2). Meanwhile, M Adora Tower A (378 units) which was launched in July 2020, achieved a take-up rate of 90%.

• We cut our FY20 net profit forecast by 18.7% while increasing FY21–22 by 8.6%–8.2% to reflect the timing of recognition due to the strong take-up rates in several of its recent launchings.

• We believe the mid-to-long-term outlook for Mah Sing remains positive backed by strong sales achieved in the past few quarters. We like Mah Sing’s quick turnaround business model that launches new projects swiftly. Maintain BUY recommendation.

Source: AmInvest Research - 1 Sept 2020