Investment Highlights

• We maintain BUY on Mah Sing Group (Mah Sing) with a higher fair value (FV) of RM0.87/share (from RM0.86/share previously) due to rolled-forward SOP-based valuation to FY24F. No changes to our neutral 3-star ESG rating (Exhibits 5 & 6).

• The FV implies a FY24F PE of 9x, at parity to the average of mid-cap property stocks currently.

• Mah Sing’s FY22 core net profit (CNP) of RM158mil came in within our forecast and consensus’. It was 1% below our forecast and street’s.

• Nevertheless, we raise our FY23F/FY24F CNP by 16%/13%. This is after taking into account its better-than-expected property sales in FY22, which could translate into higher progress billing in subsequent years.

• We also take the opportunity to introduce FY25F earnings with a growth of 5% on expectation of a pick-up in launches.

• YoY, the group’s FY22 revenue grew 32% while CNP surged 46% YoY. This was mainly driven by stronger topline (+37% YoY) of its property segment. The improvement was contributed by higher property sales and revenue recognised for its projects under construction.

• The manufacturing division recorded an operating loss of RM23mil in FY22 (vs. an operating loss of RM9mil in FY21) mainly due to low production output at its glove plants as the glove industry weathers an adjustment period of supplydemand imbalances.

• Year-to-date, Mah Sing has secured new sales of RM2.1bil (+33% YoY), exceeding its earlier target of RM2bil (Exhibit 3).

• For FY23F, management is setting a higher sales target of at least RM2.2bil (+4% YoY vs actual FY22 sales). While there is no clear guidance on its planned launches in FY23F, we anticipate the launches at RM2bil, with the major projects being M Nova, M Minori, future phases of M Senyum, Meridin East, M Panora, and Southville City.

• Meanwhile, the group’s unbilled sales declined 5% QoQ due to the acceleration of construction progress. This represent a cover ratio of 1.2x of FY23F property development revenue (Exhibit 3).

• QoQ, Mah Sing’s revenue in 4QFY22 was flattish at RM671mil. However, its CNP improved by 30% QoQ due to the provision of one-off prosperity tax in 3QFY22.

• Its 4QFY22 net gearing ratio of 0.22x (from 0.27x in 3QFY22) provides sufficient room to gear up for future valueaccretive land acquisitions of up to RM1bil. We anticipate Mah Sing will embark on land-banking activities in Greater Kuala Lumpur over the coming quarters.

• The stock currently trades at a bargain FY23F PE of only 7x vs. a 4-year average of 11x and offers an attractive dividend yield of 6%. We believe the mid-to-long-term outlook for Mah Sing remains positive backed by its:
  (i) savvy execution and quick turnaround business model; and
  (ii) strong focus on affordable properties at strategic locations which have strong demand.

Source: AmInvest Research - 1 Mar 2023