- We maintain our BUY call on Mah Sing Group and adjust its fair value to RM3.00/share (15% discount to NAV) to account for its rights issue plus warrants (3-for-10).

- Mah Sing reported a strong set of numbers amid a challenging year – FY14 net profit surged 21% YoY to RM339mil. Its results were in line with expectations.

- The strong showing was largely due to better work progress for some of its ongoing projects (e.g. Icon City, Garden Residence, Clover@Garden Residence, M-City and M Residence).

- In term of sales breakdown, projects in the Klang Valley contributed the bulk at 73%.

- The group declared a final tax-exempt DPS of 6.5 sen, which could translate into a payout ratio of 46% on an enlarged share base post its bonus issue.

- Moving into FY15F, Mah Sing targets to at least match the RM3.4bil new sales achieved in FY14 amid a more challenging market environment.

- Part of its strategy is to focus on residential launches targeting the mass market. To be sure, c.44% of its products are priced below RM500k (below RM1mil: 84%).

- Indeed, the group managed to secure bookings of ~57% for the sixth block of its Savanna Executive Suites @Southville City, which was only opened for viewing last December.

- The first five blocks have been virtually sold out, with the final blocks (built-up: from 956sf onwards) to be launched this year.

- Apart from Southville City, other key launches for FY15F include new phases at Lakeville Residence, D’Sara Sentral, Feringghi Residence 2, Meridin Bayvue@Sierra Perdana, Bandar Meridin East and Sutera Avenue. New projects include M Residence 3 (Rawang) and Icon Residence at Georgetown.

- We estimate Mah Sing to raise close to RM630mil from the proposed rights issue. Some RM370mil from this will be used to part pay its land purchases in Seremban and Puchong. Such a move is timely, as it enables the group to recapitalise its balance sheet ahead of future value-accretive opportunities.

- The stock is trading at a deep 43% discount to its NAV. This is backed by a healthy unbilled sales of RM5.2bil (~2x FY14 property revenue) and robust GDV pipeline of RM49bil (excluding another RM19bil in land options for the Puchong land).

Source: AmeSecurities