Period  1Q14

Actual vs. Expectations 1Q14 core earnings of RM84m came in within expectations, accounting for 25% of street and our estimates for the full-year.

 Sales amounted to RM770m (3% QoQ, 3% YoY) for 1Q14 which makes-up 21% of management’s FY14E sales target of RM3.6b and 23% of our RM3.3b. Major drivers were Savanna Suites @ Southville, commercial shops at D’sara Sentral and Icon City.

Dividends  None, as expected.

Key Results Highlights QoQ, earnings was up by 19% due to stronger billings from on-going projects (e.g. Icon City, M

residence@Rawang, M City@Jln Ampang). Some of these projects carry higher margins resulting in operating margins expanding from 15.8% to 17.3%. Net gearing rose to 0.25x from 0.15x as the group settled their land obligations for the year. We believe that net gearing will be capped at 0.4x by end FY14.

 YoY, revenue rose 52% while earnings rose by 21%. This was driven by strong billings on the back of strong sales, although the group recognized lower margin mix as EBIT margins eased by 3.0ppt to 17.3%.

Outlook  In FY14, the group is targeting to launch RM4.0b worth of new projects and will be focusing on the affordable/township housing market, particularly in the Klang Valley, which should drive 60% of new launches for next year. We gather that some 40% of their planned launches will be priced below RM500k/unit, 25% at between RM500-700k/unit while 10% at RM700k-1m/unit, which are digestible prices for urban areas. Management targets FY14E sales of RM3.6b while we assume a more conservative figure of RM3.3b.

Change to Forecasts No changes to earnings. Unbilled sales of RM4.64b provide 1.5-2 years visibility, making MAHSING one of the few developers with longer visibility period.

Rating Maintain OUTPERFORM

Valuation  No changes to TP of RM2.45 based on 29% discount to its FD RNAV of RM3.43. Out of the 8 developers

(>RM1b market cap) that have already released results, only 3 developers have met their sales target with MAHSING being one of them. This was an extremely commendable quarter and a testament of MAHSING’s execution capabilities given that they are on schedule to meeting their full year target, which is the second highest in town, while most developers have proportionately weaker sales this quarter. The stock has been a laggard amongst the big-cap developers. At current price the stock is trading at trough levels with FY14-15E PER of 9.5x-8.3x while it provides decent dividend yields of 5.6%-6.4%.

Risks to Our Call Unable to meet its sales target. An up-cycle in Singapore’s property sector. Sector risks, including further negative policies.

Source: Kenanga