- We maintain our BUY call on Mah Sing Group with an unchanged fair value of RM3.00/share (15% discount to NAV). Mah Sing announced on Bursa Malaysia that it has completed the issuance of an unrated perpetual sukuk musharakah with a nominal value of RM540mil via a private placement. The issue – with a distribution rate of 6.8% – has no fixed maturity date, but is callable after five years.

- We believe Mah Sing’s move is timely, as it enables the group to lock-in unsecured long-term funding while strengthening its capital structure. This comes after it had successfully raised c.RM630mil via a rights issue.

- Also, Mah Sing’s ability to raise RM540mil worth of perpetual sukuk on an unconvertible and unrated basis reflects its growing stature with investors, with improved future fund-raising options, whenever required.

- As the perpetual sukuk has equity-like features, our preliminary estimates point to an improvement in Mah Sing’s FY15F net gearing to ~9% from 25% currently. On the flipside, we estimate a small 2%-4% contraction in FY15F-16F FD EPS – assuming the entire proceeds are reinvested into fixed deposits for the time being.

- We maintain our earnings forecast for now pending more clarity on how Mah Sing will utilise the proceeds from the sukuk musharakah. Given Mah Sing’s slick execution, we nevertheless believe the monies will be quickly put to work on any value- or EPS-accretive moves.

- We believe Mah Sing remains on track to achieve its new sales target of RM3.4bil for FY15F amid a more challenging market environment. Our conviction is underpinned by the group’s focus on residential launches targeted at the mass market. To be sure, c.44% of its products are priced below RM500k (below RM1mil: 84%). - Indeed, the group managed to secure ~67% take-up rate for the sixth tower block of its Savanna Executive Suites @Southville City, which was launched last December. The seventh block was open for viewing about a fortnight ago. The first five blocks have already been sold out.

- On the other hand, Avens Residences (197 units of 2½ to 3-storey linked homes) is ~70% sold. Overall, Mah Sing is targeting to rake in c.RM921mil (FY14: RM803mil) or ~27% of the group’s overall new sales target of RM3.4bil.

- We continue to rate Mah Sing as our top large cap property pick. The stock is trading at a deep 42% discount to its NAV, and is backed by a healthy unbilled sales of ~RM5.2bil and robust GDV pipeline of RM49bil (excluding another RM19bil in land options for the Puchong land).

Source: AmeSecurities