Results

• Within expectations: Reported 9M17 core profit of RM265.2m (-3.8% YoY), accounting for 72.6% of ours and 75.4% of consensus full year forecasts, respectively.

Deviations

• None.

Dividends

• None.

Highlights

• QoQ: 3Q17 revenue (-3.1%) were largely flat without major fluctuations or change in revenue contributing projects. Core profit decreased by 6.7% due to lower revenue and higher higher administrative and other expenses.
• YoY: Revenue contracted by 3.8% mainly due to lower progressive billings as certain development phases within the Southville City project were at tail end. Core profit was down by 8.2% due to higher administrative and other expenses after excluding gain from a disposal of subsidiary.
• YTD: Revenue was down marginally by 2.7% mainly due to lower progressive billings as certain phases within Southville City were approaching completion. Similarly, core profit declined by 3.8% due to lower revenue and higher SG&A expenses, partially mitigated by lower tax expense.
• Property sales for 3Q17 achieved RM436.0m (YTD sales: RM1.3bn), in line to meet full year sales target of RM1.8bn. 9M17 sales were contributed by Greater KL (63%), Johor (23%), Penang (12%) and Sabah (2%).
• Total unbilled sales stood at RM2.8bn (2Q17: RM3.0bn) as at end of 3Q17, representing 1.1x cover ratio over FY16 property development revenue.
• In line with government’s broad objective, moving forward, Mah Sing will focus on property launches below the price of RM500k to meet the current strong market demand for affordable housing.
• Notably, Mah Sing has garnered a strong response (>85% take-up) towards its recent launches of affordable products in M Vertica @ Cheras, M Centura @ Sentul, M Vista @ Southbay Penang and Fern @ Meridin East.

Risks

• Slower than expected sales; execution risks for projects.

Forecasts

• We lower our forecast for FY18 and FY19 by 17.2% and 37.4% following the recent announcement on the abortion of Titiwangsa land acquisition and revision of our launches assumptions.

Rating

HOLD ↔

• Healthy balance sheet with low net gearing and consistent dividend yield of 4.3% with a minimum payout ratio of 40%.

Valuation

• Maintain HOLD with lower TP of RM1.53 (from RM1.57) based on unchanged 35% discount on RNAV of RM2.35.

Source: Hong Leong Investment Bank Research - 30 Nov 2017