Investment Highlights

• We maintain our BUY call on Mah Sing Group with unchanged fair value of RM1.28 based on SOP valuation (Exhibit 2). We make no changes to our FY21–22 numbers while introducing FY23 net earnings forecast at RM247.6mil.

• Mah Sing reported its FY20 revenue and net profit of RM1,530.8mil and RM100.4mil respectively. Excluding the distribution to perpetual sukuk/ securities (RM73.2mil) and adding back exceptional items (RM36.4mil), the company’s FY20 core net profit of RM63.6mil is within our and consensus expectations.

• Mah Sing’s FY20 core PATAMI declined by 25% YoY due to: (i) the negative impact of the MCO which led to slower sites activities; and (ii) stricter lending environment that weighed on revenue recognition. However, management indicated encouraging sales of RM250mil (in January and February), vs. RM247mil in 1Q2020, thanks to its new marketing campaign “Home with Mah Sing” which offers an easy payment scheme and various incentives, such as low booking fees, free SPA and legal fees. Mah Sing has also met its FY20 sales target of RM1.1bil while unbilled sales of RM1.6bil will be progressively recognized over the next 3 years.

• Mah Sing’s balance sheet remains healthy with net cash of RM635mil as of FY20. With the latest new land acquisition in Sepang, the group has accumulated up to 2,076 acres of landbank with a remaining gross development value (GDV) of RM24.6bil. The company has proposed a dividend of 1.66 sen/share for FY20 (vs. 3.35 sen/share in FY19), translating into yield of 2.0%.

• Moving forward, Mah Sing is targeting new sales of RM1.6bil in FY21 with at least 8 new launches whereby 91% are priced below RM700K, and 51% below RM500K. For plastics manufacturing, Mah Sing continues to be a leading player in the industry with the segment accounting for 20% of the group’s revenue. The company’s glove business is ready to take off with the production expected to commence in April 2021 and earnings recognition in 2QFY21.

• We believe the mid-to-long-term outlook for Mah Sing remains positive backed by: (i) its effort in digital marketing and affordable properties offered at strategic location; (ii) solid earnings in plastics manufacturing and (ii) positive contribution from its glove manufacturing business in 2QFY21’s earnings onwards. We also like Mah Sing’s quick turnaround business model that launches new projects swiftly. Maintain BUY.

Source: AmInvest Research - 26 Feb 2021