Investment Highlights

• We keep our HOLD recommendation on Mah Sing with an unchanged SOP-derived fair value of RM0.95/share and a neutral ESG rating of 3 stars. (Exhibits 1 & 2).

• Our SOP has been reduced marginally by 0.2% or RM5mil to RM2.4bil arising from the disposal of a leasehold land measuring 3.2 acres (12,871 sq metres) at M Cahaya, No. 1, Jalan Utarid A U5/A, Mutiara Subang, Seksyen U5, Shah Alam, Selangor.

• The land carried a gross development value (GDV) of RM155mil as at 31 March 2020 while the deal is expected to be completed by the end of 2021.

• We estimate that the land sale to Inta Bina Group’s whollyowned Angkasa Senuri Sdn Bhd for RM9.3mil cash could generate a minimal net gain of RM3mil given a net book value of RM4.9mil in Mah Sing’s FY20 annual report. This translates to a slight 1% rise to our FY21F core net profit to RM177.5mil with a marginal 0.6% decline for FY22–23F.

• The selling price translates to RM67.13 psf. While there are not many identical transactions within the area recently, the asking price for leasehold land surrounding Shah Alam, Selangor larger than 3 acres ranges from RM36 psf to RM60 psf based on our channel checks.

• We understand that the undeveloped land parcel was left over from the earlier Mah Sing Industrial Park project (M Cahaya) in Sungai Buloh.

• While insignificant to the group’s gearing levels, we expect the group to use the proceeds for land-banking activities or repay borrowings.

• We are positive on the group’s strategy to monetise its undeveloped land in Klang Valley which is too small in scale to turn into meaningful projects. Meanwhile, it also allows the group to focus on existing projects with better market prospects.

• At this stage, we remain cautious on the company’s short-term outlook stemming from its high exposure to local projects in its property segment, which account for 74% of SOP, as prolonged movement restrictions in the country from high Covid-19 infection rates could lead to a deterioration in earnings risk.
   
• Currently, the Stock Trades at a Slightly Pricey FY21F PE of 12x Vs. Its 4-year Average of 10x.

Source: AmInvest Research - 26 Jul 2021