- We maintain our BUY call on Mah Sing Group with our fair value revised to RM2.38/share (previously: RM3.00/share). This mainly takes into account the new bonus issue shares and warrants, which will be listed tomorrow.

- With an enlarged share base of 2.4bil, we believe the bonus issue (1-for-4) would help improve the stock’s liquidity, while the new warrants (~166 million with an exercise price of RM2.10/share; expiring in 2020) provide another avenue for long-term funding.

- The bonus and warrants issue comes after Mah Sing had successfully raised ~RM1.2bil in the form of a rights issue and perpetual sukuk. This should be more than sufficient to meet Mah Sing’s estimated land commitments of c.RM1.1bil over the next two years.

- Out of the RM630mil raised from the rights issue, some RM370mil has been earmarked as part payment for the purchase of land in Puchong and Seremban. Another RM160mil has been allocated for future landbanking/development activities.

- At the same time, such a move frees up cash flow and enables the group to capitalise on any value-accretive land-banking deals. As at end-March 2015, it is in a comfortable net cash position of ~RM280mil.

- Mah Sing’s earnings visibility remains given its healthy unbilled sales pipeline of RM5.1bil or ~2x its FY14 property revenue. In addition, we expect the group to be well-positioned to ride on any resurgence in property presales, as it expects buying momentum to normalise by 2H15 after the implementation of GST on 1 April.

- Mah Sing’s realignment of its product mix favouring affordable homes – c.84% below RM1mil and 44% below RM500k – in good locations, would help sustain its sales momentum.

- For the full-year, the group has maintained its new sales target of RM3.4bil (1Q: RM761mil). New launches for 2H15 include the Festival City integrated development within Puchong’s CBD and Bandar Meridin East in Johor.

- We continue to rate Mah Sing as our top large cap pick for any recovery in the property sector. The stock is trading at a deep 38% discount to its NAV. This is backed a robust GDV pipeline of RM44bil.

- A potential wildcard is its 1,051acre landbank in Seremban (implied land cost: ~RM8.50psf), which should benefit from the government’s plans to develop the 108,000ha Malaysia Vision Valley as mooted under the 11th Malaysia Plan.

Source: AmeSecurities Research - 10 Jun 2015