Results

• Within expectations: FY17 core profit of RM354.0m (-3.0% YoY), accounting for 96.9% of ours and 100.0% of consensus full year forecasts, respectively.

Deviations

• None.

Dividends

• Proposed a final dividend of 6.5 sen per share (FY16: 6.5 sen), yielding 5.4% at current price.

Highlights

• QoQ: 4Q17 revenue improved by 8% following the higher progress in ongoing projects. Core profit improved by only 5.2% due to higher selling and marketing expenses after excluding the RM7.9m disposal gain in 3Q17.

• YoY: Revenue grew marginally by 2.5% given the higher progressive billings without major fluctuations or change in revenue contributing projects. Core profit grew in tandem (+3.7%) with the higher revenue and better blended margin.

• FY17: Revenue was down marginally by 1.4% mainly due to lower progressive billings as certain phases within Southville City were approaching completion. Similarly, core profit declined by 2.0% in tandem with the lower revenue.

• Property sales for FY17 achieved RM1.8bn, meeting the full year sales target . The sales compositions are Greater KL (63%), Johor (19%), Penang (14%) and Sabah (3%).

• Total unbilled sales stood at RM2.7bn (3Q17: RM2.8bn) as at end of 4Q17, representing 1.1x cover ratio over FY17 property development revenue.

• FY18 target is set at a minimum RM1.8bn with continue focus on affordable housing. 74% of 2018 targeted sales will be drawing from property launches below the price of RM500k to meet the current market landscape.

• 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

• Unchanged.

Rating

HOLD ↔

• While share price has tumbled recently, we do not see a catalyst in the short term with the declining unbilled sales despite the deep discount to our estimated RNAV. On a positive note, the renewed focus on affordable products has garnered strong responses. Healthy balance sheet with low net gearing and consistent dividend with a minimum payout ratio of 40% will continue to support the share price.

Valuation

• Maintain HOLD with unchanged TP of RM1.53 based on unchanged 35% discount on RNAV of RM2.35.

Source: Hong Leong Investment Bank Research - 1 Mar 2018