Results

• Within Expectations: 1HFY16 PATAMI decreased slightly by 2.9% yoy to RM184m, accounting for 48% and 49% of our and consensus full year forecasts respectively.

Dividends

• None.

Highlights

• YoY: 2QFY16 revenue was flat and PATAMI fell slightly by 2% as M City and Icon City are approaching completion.

• QoQ: Despite a sequential revenue growth of 9%, PATAMI fell by 7% mainly affected by the loss on the repurchase of redeemable convertible secured bonds of RM18m.

• In 2QFY16, MSGB achieved new property sales of RM361m (versus RM408m in 1Q16). For the seven months period ended July 16, news sales already reached RM1.03bn, on track to achieve full year sales target of RM2.3bn.

• With the right strategy to focus on properties priced below RM600k, new launches such as LakeVille Residence 6th tower, Cerrado Tower A, Meridin East link homes and Ferringhi Tower B received overwhelming response with strong take up rate ranging from 84% to 100%.

• As of Aug 16, Mah Sing already launched RM1.2bn worth of new projects with remaining of RM700m to be launched over 3Q and 4Q. These launches include the final block of serviced apartment at D’sara Sentral, Cerrado Block C&D and MResidence2 landed cluster homes in Rawang.

• Balance sheet also continues to strengthen with net gearing being further reduced from 0.09x in 1Q16 to 0.06x in 2Q16. We understand that the company is in the midst of negotiation of few potential land acquisitions in Klang Valley.

• Unbilled sales decreased slightly from RM4.5bn to RM4.2bn, representing 1.5x of FY15 property revenue.

Risks

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

Forecasts

• Unchanged.

Rating

HOLD

• Healthy balance sheet with low net gearing; and attractive dividend yield of 4.0% based on minimum dividend payout of 40%.

Valuation

TP is raised from RM1.41 to RM1.53 (reducing discount to RNAV from 40% to 35% as the company is on track to achieve its full year sales target). Maintain HOLD with dividend yield of 4%.

Source: Hong Leong Investment Bank Research - 26 Aug 2016