Results

3Q13 core PAT rose 27.9% yoy to RM70.6m, with YTD net profit of RM209.9m making up 76% and 73% of HLIB and consensus estimates respectively.

Deviations

None

Dividends

None

Highlights

Stable margins in 3Q. Gross profit margin was fairly stable at 28% in 3Q FY13, vs. 29% in 3Q FY12.

Record unbilled sales of RM4.2bn is 2.7x last year’s development revenue and ensures high earnings visibility.

RM3bn sales target on-track, as 9M sales of RM2.25bn implies 75% run-rate.

Active in landbanking. To date in 2013, MSGB has embarked on 5 land deals with combined GDV of RM8.9bn, exceeding its 2012 full year landbanking of RM7.4bn by more than 20%. This brings its remaining GDV and unbilled sales to approximately RM28.4bn.

Thriving without DIBS. Since the beginning of this year, Mah Sing has stopped offering DIBS for most of its new previews and launches, but has still managed to get good response for its launches. As an example, Phase 1 of Southville@Bangi was 75% pre-selected within one month. In Iskandar Malaysia, none of the projects offer DIBS, including Meridin@Medini, the integrated development next to Legoland. Phase 1, which was launched in mid-2013, is 80% taken up to-date.

Focusing on affordable homes. Two key projects to contribute to future earnings are M Residence at Rawang and Bandar Meridin East, with balance GDV of RM1.6bn and RM5.0bn respectively. We believe these projects will be able to do well as they starting prices are below RM500k.

Impact of price floor. We also believe the impact of the new RM1m price floor for foreigners will only have a marginal impact to MSGB, given that foreigners only make up 7% of sales. Moreover, Meridin@Medini, which is priced from RM300k onwards, is located in a special economic zone, which has no minimum price for foreign buyers.

Risks

Slower than expected sales; execution risks for projects; inability to replenish landbank.

Forecasts

Maintained.

Rating

HOLD

Given macro and sector headwinds, we are keeping our HOLD call on Mah Sing at this point in time.

Valuation

Maintain TP at RM2.09 (55% discount to RNAV).

Source:Hong Leong Investment Bank Research - 12 Nov 2013