4QFY20 CNP of RM25.5m lifted FY20 CNP to RM62.8m - above our estimate due to higher-than-expected property billings from normalised operations. Remain upbeat over FY21 prospects which should see both its traditional divisions (property and plastic) and new division (glove) contributing strongly towards bottom line, lifting earnings higher than pre-pandemic levels. On unchanged earnings, maintain OP and SoP-derived TP of RM1.05.

Above our, but below consensus, estimate. 4QFY20* CNP of RM25.5m lifted FY20 CNP to RM62.8m (+10% QoQ; +44% YoY) – above our expectation but below consensus’ at 156%/90% of full-year estimates respectively. The negative deviation against ours was due to higher-than-expected property billings which led to higher revenue recognition. Meanwhile, we believe the underperformance against consensus is due to the fact that consensus did not deduct perps payments (of RM35.8m in FY20) to derive its core CNP estimate. A 1.66 sen dividend also surpassed our 0.5 sen estimate.

*We derive our 4QFY20 CNP after reversing out: (i) RM2.7m insurance income from a fire that broke out at its Plastic division in 2QFY20, (ii) RM14.3m allowance of impairment for property inventories and financial assets, (iii) RM10m loss on IP, and (iv) RM3.4m write off of property land held for development.

Sales in line. 4QFY20 sales of RM428m (+41% QoQ) lifted FY20 sales to RM1.1m (-27% YoY) – in line with our/management’s target of RM1.1b.

Highlights. 4QFY20 CNP of RM25.5m was up 10% QoQ even after the RM27.5m perpetual distribution made during the quarter mainly due to higher progress billings in their property development segment from key projects (i.e. M Centura and M Vertica). YoY, FY20 CNP of RM62.8m plunged 42% as a result of the Covid-19 lockdowns which saw all business divisions recording weaker pre-tax earnings on the back of lower revenues.

Management introduced FY22E sales target of RM1.6b (ours at RM1.7b) on the back of launch target of RM2.4b. Focus is still largely in the Klang Valley with the remainder from Johor and Penang.

MCO 2.0 that began in 14th Jan 2021 barely affected sales with Jan Feb 21 already registering healthy sales of RM250m. That said, construction progress might be affected as contractors comply with the stricter rules.

Glove operations on track to begin in April 2021. For orders from April – June, Mahsing has locked in sale prices of USD100-110/1,000 pieces.

Maintain FY21E earnings and introduce FY22E earnings. Despite this quarters outperformance, we keep our FY21E earnings unchanged as we had already priced in a stronger property recovery for FY21E. Meanwhile, we introduce FY22E CNP of RM248m. Note that we have pencilled in glove ASPs of USD55/1,000 pieces and USD40/1,000 pieces for FY21 and FY22E, respectively.

Maintain Outperform with unchanged SoP-TP of RM1.05. We find Mahsing in a sweet spot at this juncture as they get to ride earnings rebound from its property division while the new earnings stream from glove manufacturing with elevated glove prices will cascade strongly towards bottom-line, propelling profits above pre-pandemic levels in FY21.

Source: Kenanga Research - 26 Feb 2021