Mah Sing’s recent launch over the weekend, Tower A of M Adora, achieved bookings of 90% for its 378 units which then led to the launch of Tower B. Another launch which was carried out recently in June, M Luna, now has bookings of 91% for the c.600 units launched. We remain positive on the take up outcomes as the affordable products still garner strong demands despite the economic uncertainty brought about by Covid -19. We expect FY20 to be a bottomed year and remain upbeat on the longer-term prospects as FY21 will see better earnings contributions from key projects such as M Vertica and M Centura which are currently in its early stages of construction. Maintain forecasts and BUY rating with an unchanged TP of RM0.64.

We attended Mah Sing’s recent sales gallery opening in Wangsa Melawati for the launching of M Adora. Below are the key takeaways

M Adora. The development comprises of two blocks Tower A (378 units) and B (299 units) generating a combined GDV of RM378m. The units go for about RM550psf (after rebates) with built-ups ranging from 850 sqft to 1,200 sqft. Surrounding amenities include: (i) malls such as Wangsa Walk Mall, Aeon Big Wangsa Maju, Aeon Alpha Angle; (ii) schools such as Fairview International School, Tar College, UTM KL; (iii) recreational locations such as Klang Gates Quartz Ridge and Zoo Negara; and (iv) hospitals such as Columbia Asia Hospitality and Gleneagles Hospital.

A strong response towards the recent launches. M Adora is Mah Sing’s first high rise condominium in Wangsa Melawati and has received good take-up over the weekend launch. As Tower A had achieved bookings of 90% for its 378 units, Tower B which was initially targeted to launch at a later date is now open for sale. Another launch which was carried out recently in June, M Luna, now has bookings of 91% for the c.600 units launched (est. GDV RM317m). This project will have a total of 1,600 units with phased launches of about 200 units each time. We remain positive on the take-up outcomes as the affordable products still garner strong demand despite the economic uncertainty brought about by Covid-19.

Outlook. Mah Sing maintains its FY20 sales target of RM1.6bn but cautions its initial GDV launch target of RM2.1bn. Despite strong bookings towards the recent launches, the sales outcome will be largely dependent on the conversion rate of bookings to SPA which may be affected by buyers being more cautious on following through with the purchase. With regards to progressive billing recognition for FY20, we note that construction works have normalised for all projects. We expect FY20 to be a bottomed year and remain upbeat on the longer-term prospects as FY21 will see better earnings contributions from key projects such as M Vertica and M Centura which are currently in its early stages of construction. Furthermore, Mah Sing’s unbilled sales for stands at RM1.8bn (as of 1QFY20), representing a healthy cover ratio of 1.3x.

Forecast. Unchanged

Maintain BUY with an unchanged TP of RM0.64 based on an unchanged discount of 70% to RNAV of RM2.14. We see value in the stock as it is priced at a P/B valuation of 0.4x (below -2SD of its 5-year mean), and is lower than its GFC trough of 0.68x. The focus on affordable products should garner strong responses (as seen in its recent launches) and dividend with a minimum payout ratio of 40% (FY20 yield: 3.9%, FY21 yield 5.4%) would hopefully serve as a support to share price.

Source: Hong Leong Investment Bank Research - 22 Jul 2020