Results

• Within Expectations: Reported 1H17 core profit of RM180.8m (-1.7% yoy), accounting for 49.5% of ours and 51.5% of consensus full year forecasts, respectively.

Deviations

• None.

Dividends

• None.

Highlights

• QoQ: 2Q17 revenue and core profit were flat without major fluctuation or change in revenue contributing projects.
• YoY: Revenue contracted by 6.0% mainly due to lower progressive billings, partially mitigated by additional recognition from Meridin East project in Johor. However, core profit improved by 1.8% due to lower SG&A expenses and effective tax rate.
• YTD: Revenue was down marginally by 2.2% mainly due to lower progressive billings with M City and Icon City as they were approaching completions. Similarly, core profit declined by 1.7% due to lower revenue and higher SG&A expenses, partially mitigated by lower tax expense.
• Property sales for 2Q17 achieved RM409m (YTD sales: RM819.3m), in line to meet full year sales target of RM1.8bn. 1H17 sales were contributed by Greater KL (71%), Johor (15%), Penang (11%) and Sabah (3%).
• Total unbilled sales stood at RM3.0bn (1Q17: RM3.5bn) as at end of 2Q17, representing 1.1x cover ratio over FY16 property development revenue.
• Moving forward, Mah Sing will focus on property launches below the price of RM500k such as M Vertica @ Cheras, M Centura @ Sentul, Southville City@ KL South, M Aruna @ Rawang, M Vista @ Southbay Penang, industrial park in Bukit Mertajam as well as Phase 2 of Fern in Meridin East.
• Having announced 4 new land deals recently with GDV up to RM4.3bn, we understand that Mah Sing is still actively eyeing for land acquisitions within Klang Valley to increase its presence to 75% of total exposure.

Risks

• Slower than expected sales; execution risks for projects.

Forecasts

• Unchanged.

Rating

HOLD ↔

• Healthy balance sheet with low net gearing and consistent dividend yield of 3.9% with minimum payout ratio of 40%.

Valuation

• Maintain HOLD with unchanged TP of RM1.57 based on unchanged 35% discount on RNAV of RM2.42.

Source: Hong Leong Investment Bank Research - 29 Aug 2017