Period     1Q13

Actual vs. Expectations     1Q13 net profit of RM69.5m was within expectations, making up 24% of street’s FY13E net profit of RM288m and 25% of our RM275m.

1Q13 sales of RM750m (+11% YoY) is on track to meet the group and our FY13E sales targets of RM3.0b. 

Dividends    No dividend as expected.

Key Results Highlights    YoY, 1Q13 earnings grew 15.8% despite  a 7.6% decline in revenue. The lower revenue was due to contributions from mostly high-rise projects, which are still at early stages of construction (e.g. M-City, M-Suites, Icon City). However, stronger earnings were observed as their group pretax margin was higher at 21.7% as compared to 18.4% in 1Q12. This was mainly due to better product mix, higher interest income and the absent of rental guarantee commitment to Southgate and Icon Tun Razak. 

QoQ, 1Q13 bottomline also increased by 25.2%. This was also due to same reason as mentioned above, which boosted groups pretax margins by 5.3ppt to 21.7%. 

Outlook    FY13E sales target will be mainly driven by Icon City@PJ, Southville City, Southbay City, etc. The company also concurrently announced two acquisitions of landbank in Iskandar Johor and Taman Wahyu (Klang Valley) with the 1Q13 results which amounts to new GDV of RM5.5b. However, these project contributions will only be felt from FY15 onwards (refer to overleaf).

Change to Forecasts   No changes to our FY13-14E net profit of RM275m-RM336m. Unbilled sales of RM3.6b provides 1.7 years visibility.

Rating  Maintain OUTPERFORM

Valuation     We have upgraded MAHSING TP to RM3.60 (post-bonus TP of RM3.13) from previous TP of RM2.76 (RM2.40 post-bonus). Our TP is now on parity with their revised FD RNAV given the new land acquisitions (refer to overleaf). MAHSING has now increased their Johor exposure by 196% to RM6.6b via the said land acquisition relative totheir FY13E sales target of RM3.0b. We view Johor as strong demand drivers which will help the group secure, if not, exceed sales targets. 

Risks    Unable to meet sales targets; this will be more impactful on developers with higher net gearing. Sector risks, including negative policies.

Source: Kenanga