Investment Highlights

• We maintain BUY on Mah Sing Group (Mah Sing) with a highe SOP-based fair value (FV) of RM1.25 (from RM1.06/shar previously) based on a 45% discount to our rolled-forward SOP-based valuation . We made no changes to ou neutral 3-star ESG rating .

• The FV implies a FY25F PE of 11x, at parity to the average o mid-cap property stocks currently.

• Mah Sing’s FY23 core net profit (CNP) of RM218mil came in above expectations. It was 8% above our earlier forecast and 11% above street’s.

• The variance to our forecast was mainly due to stronger-than expected contribution from its property developmen segment.

• Hence, we raise FY24F/FY25F CNP by 7% to account fo stronger-than-expected sales from its property developmen segment.

• YoY, the group’s FY23 revenue rose 12% while CNP surged 38% YoY. This was mainly driven by stronger property toplin (+15% YoY), contributed by higher property sales and revenu recognised for projects under construction.

• The operating loss of the manufacturing division wa narrower at RM5mil in FY23 (vs. an operating loss of RM23m in FY22), mainly due to ongoing cost optimisation measure of its glove-making operation.

• Year-to-date, Mah Sing has secured new sales of RM2.3b (+7% YoY), exceeding its earlier target of RM2.2bil The major sales contributors are M Astra (23%), Meridin Eas (18%), M Senyum (11%) and M Vertica (11%).

• Mah Sing launched RM2bil (+65% YoY) worth of properties in FY23 with a commendable take-up rate ranging from 84% 100% .

• For FY24F, management is setting a higher sales target of a least RM2.5bil (+11% YoY vs. actual FY23 sales), supported by planned launches of RM2.8bil .

• Meanwhile, the group’s unbilled sales fell 4% QoQ to RM2.3bil, which represents a fair cover ratio of 1x FY24F property development revenue .

• QoQ, Mah Sing’s revenue in 4QFY23 expanded 4% while CNP surged 42%. This higher CNP margin of 10.5% in 4QFY23 vs 7.8% in 3QFY23 was largely attributed to the realisation o cost savings upon finalisation of construction contracts fo completed phases.

• In 4QFY23, Mah Sing net gearing ratio was low at 0.08x, down from 0.13x in 3QFY23. Nevertheless, we anticipate an uptick in its FY24F net gearing ratio as a result of finalising payments for several land acquisitions.

• Mah Sing is currently under negotiations with several parties for potential land acquisitions in Klang Valley, Penang and Johor for the development of residential and industrial properties.

• The stock currently trades at a bargain FY25F PE of only 9x vs. a 4-year average of 11x and offers an attractive dividend yield of 5%. 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 - 28 Feb 2024