Investment Highlights

• We make no changes to our earnings forecasts and our fair value, based on a 30% discount to its RNAV. Maintain BUY, fair value RM1.71. Key risks to our call include a sharp downturn in residential property market and higher-than-expected property loan rejection rate.

• Mah Sing’s 1HFY17 net profit of RM180.8mil came in line with expectations, making up 50% of our full-year forecast and 52% of consensus. No dividend was declared, as expected.

• Mah Sing’s registered RM1.3bil in revenue from the property development division resulting in RM218.7mil in operating profit in 1HFY17. The operating profit dropped 13.3% mainly due to higher selling, marketing and administrative expenses. Its plastics’ division registered strong growth, with operating profit growing 13.1% YoY to RM7.1mil with revenue improving 19.4% YoY to RM147.9mil.

• Mah Sing launched RM1.1bil GDV of projects in 1HFY17, made up mainly by Lakeville Residence, Taman Wahyu (RM198mil), Southville City, KL South (RM183mil), and Southbay City, Penang (RM128mil). It is targeting to launch RM1.9bn GDV of projects in FY17, spread across its projects in Klang Valley, Penang and Johor, with about half of them to be launched in 2H17.

• Mah Sing recorded new property sales of RM819.3mil in 1HFY17, contributed mainly by its Lakeville Residence (RM257mil), Southville City @ KL South (RM177mil) and Feringghi Residence (RM50mil) projects. It has set a target of new property sales of RM1.8bil for FY17, which we believe is achievable given that it still has a substantial amount of new launches in 2HFY17, and due to the group’s higher focus on the affordable segment, with a target of 73% of residential property sales priced below RM700K.

• Armed with a strong balance sheet, with a net cash position and cash balance of RM1.5bil as at end-1H17, we expect Mah Sing to continue on its land banking activity for the remaining of the year. To date, it has announced four new land acquisitions, namely the Titiwangsa land (3.5 acres), Sentul land (9.0 acres), M Vertica, Cheras (11.2 acres) and Permatang, Penang (17.3 acres). The total GDV for the proposed developments on these lands amount to RM4.3bil. These projects are based on a quick turnaround business model, lowering the land holding risk, resulting in better cash flow for the group.

Source: AmInvest Research - 29 Aug 2017