Period  2Q14/1H14

Actual vs. Expectations 1H14 earnings of RM168.8m came within expectations, making up 50% and 51% of street and our FY14E estimates, respectively.

 Sales amounted to RM1.55b for 1H14 on the back of RM2.18b worth of launches which implied average take-ups of 71%. This is on track to meeting targets, being 47% of our FY14E sales assumptions of RM3.3b and 43% of management’s RM3.6b. Key drivers were Southville City@Bangi, Meridin@Medini, Icon City@PJ and D’sara Sentral which all made up 73% total sales.

Dividends  None, as expected.

Key Results Highlights QoQ, earnings was flat (+0.8%) as there was a 1.3ppt compression in operating margins to 16.1%. Although property billings were on an uptrend, we noted recognition of lower margin projects.

 YoY, 1H14 revenue rose by 50%, thanks to recognition of strong sales observed in previous periods. But corresponding bottomline was up by only 21% because we observe a 4.2ppt compression in pretax margins to 16.7% due to similar reasons mentioned above. MAHSING was and is still churning out more affordable projects over the last 12-18 months with typically thinner margins. However, this was expected.

Outlook  MAHSING is confident that they will be able to quickly overcome the issues with the Seremban land deal. Given the aggressive landbanking mode, we do not discount more landbanking in the near future, especially if they can secure more deferred payment terms.

Change to Forecasts No changes to earnings. Unbilled sales of RM4.8b provides close to two years visibility, which is one of the highest earnings visibility amongst developers under our coverage.

Rating Maintain OUTPERFORM

Valuation  No changes to TP of RM3.05 based on 33% discount on our FD RNAV of RM4.58. The stock is trading at unwarranted trough valuations of FY14-15E PER of 10x-9x and offers decent dividend yields of c. 4%. With the recent strong landbanking news, it will be tough to ignore this laggard anymore.

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