Investment Highlights

• We maintain our BUY call on Mah Sing Group (Mah Sing) with a lower fair value of RM0.99 per share (from RM1.01), based on a 50% discount to its RNAV (Exhibit 1). The reduction in fair value is to reflect the dilutive impact from the conversion of redeemable convertible sukuk murabahah into new shares in the future. We make no changes to our FY20–22 net earnings forecasts.
• Mah Sing proposed to issue up to RM100.0mil nominal value of 7-year redeemable convertible sukuk murabahah (convertible sukuk) at an issue price to be determined later.
• The convertible sukuk are convertible into Mah Sing’s new shares at the option of the holder at any time from and including the issue date of the convertible sukuk and up to the maturity date. Proceeds from the issuance of the convertible sukuk will be used for future investments.
• Assuming a full conversion into new shares, Mah Sing’s share base will expand from 2,427.6mil shares to 2,560.1mil shares while cash flow will be increased by RM100mil. As a result, we cut our fair value from RM1.01 to RM0.99 (Exhibit 1). At RM0.99, the stock still offers a potential upside of 45.6%, hence maintaining our BUY recommendation.

Source: AmInvest Research - 25 Sept 2020