Results

• Slightly Below Expectations: 9MFY16 PATAMI was flat yoy, accounting for 72% of our and consensus full year forecasts respectively.

Deviation

• Mainly due to slower progress of billing.

Dividends

• None.

Highlights

• YoY: 3QFY16 revenue fell 5% mainly due to lower contribution from M City and Icon City as both projects are approaching completion. However, PATAMI increased by 9% due to lower marketing and admin expenses.

• QoQ: Revenue fell but PATAMI improved by 3.5% due to the same reason above.

• In 3QFY16, MSGB achieved new property sales of RM632m (versus RM361m in 2Q16), mainly contributed from the new launching in SouthVille, Lakeville Residence and Meridian East. For the nine months period ended Sep 16, new sales reached RM1.4bn, merely accounting for 61% of full year sales target. In view of the prolonged weak sentiment on the property outlook and tight loan approval, company has lowered down its sales target from RM2.3bn to RM1.8bn (- 22% YoY).

• Balance sheet remains solid with net gearing at 0.09x, provides more room for land banking exercise. We understand that the company is in the midst of concluding a land acquisition in Klang Valley.

• As of Sep 16, Mah Sing already launched close to RM1bn worth of new projects. Mah Sing will be launching its final tower of D’sara Sentral by end of Nov. The final tower comprises 197 units of serviced residence with starting price at RM603k. Unbilled sales decreased slightly from RM4.2bn to RM4.0bn, representing 1.4x of FY15 property revenue.

Risks

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

Forecasts

• FY16, FY17 and FY18 earnings forecasts are reduced by 4% and 15% and 8% respectively as we factor in lower sales target.

Rating

HOLD ↔

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

Valuation

• TP is adjusted slightly from RM1.53 to RM1.52 (based on unchanged 35% discount on lower RNAV of RM2.34 (previously RM2.35). Maintain HOLD .

Source: Hong Leong Investment Bank Research - 28 Nov 2016