• 9MFY23 core net profit came within expectations. Losses from the manufacturing segment has narrowed on improved operating efficiency.

• Mah Sing Group achieved RM1.8bn property sales for 9M23 and seems on track to achieve, if not surpass, its FY23F guided sales target of RM2.2bn.

• Reiterate Add, with an unchanged TP of RM1.10 (based on 0.7x FY24F P/BV). The stock also offers dividend yields of 4.1-4.7%.

Operating Loss From Manufacturing Segment Has Narrowed

In 3QFY23, Mah Sing reported higher core net profit (excluding impairments, forex gain and gain on redemption of financial assets) of RM49.9m (+16% yoy; +6% qoq), despite a 4% yoy drop in revenue. Effective tax rate was lower at 32% (vs. 37% in 3Q22). 9MFY23 core net profit of RM147m (+13% yoy) accounted for 72% and 78% of our and Bloomberg consensus’ FY23F estimates, respectively, which we deem in line. For 9M23, operating loss from the manufacturing segment narrowed to RM5.4m (vs. RM14m loss in 9M22), on improved operating efficiency. As expected, no dividend was declared in 3Q23 (9M22: nil). We expect dividend payout in 4Q23, with an indicative payout of 40% (as per policy).

On Track to Achieve, If Not Surpass, FY23F Property Sales Target

3Q23 revenue grew 25% yoy, taking 9M23 revenue to RM2.9bn (+9% yoy), on the back of higher property sales. Mah Sing achieved property sales of c.RM600m in 3Q23, taking 9M23 new property sales to RM1.8bn (9M22: RM1.57bn). At 82% of its FY23F sales target, we believe the developer is on track to achieve, if not surpass, its guided sales target of RM2.2bn. YTD, its M-Series launches — M Nova, Phase 3A M Senyum, M Minori and M Panora — received encouraging demand, with a more than 90% take-up rate. Unbilled sales stood at RM2.42bn as at 30 Sep 23 (c.1.3x cover ratio).

More M-Series Launches in the Pipeline

Management guided for its future launches to include future phases of M Senyum in Salak Tinggi, Meridian East in Johor, M Residence in Rawang and M Sinar in Bangi. We expect sales momentum for its M-Series products to remain strong given its affordable price points of below RM500k. Land acquisition would continue to be one of the key strategies, according to management, supported by the group’s strong balance sheet position.

Reiterate Add, With An Unchanged TP of RM1.10

We make no changes to our earnings forecasts and RM1.10 TP, still based on 0.7x FY24F P/BV, its 10-year mean. Reiterate Add for its attractive product price points, strong balance sheet position (0.13x net gearing as at Sep 23) and strong sales momentum. Re-rating catalysts: timely completion of projects and continued sales momentum, supported by attractive price points targeting the more resilient first-time homebuyers. The stock is supported by a 4.1-4.7% dividend yield. Downside risks: delays in planned project completions — namely M Arisa and M Luna (slated for completion in 2024F) — and widerthan-expected losses from its glove unit due to oversupply pressures on ASPs.

Source: CGS-CIMB Research - 29 Nov 2023