MAHSING’s 1HFY23 results met expectations. Its 1HFY23 net profit grew 17% YoY on improved sales, particularly in the affordable segment. It will continue to selectively acquire land parcels to fuel future projects. We maintain our forecasts but raise our TP by 14% to RM0.80 (from RM0.70). Maintain MARKET PERFORM.

Within expectations, as MAHSING’s 1HFY23 core net profit of RM100.5m accounted for 52% of both our full-year forecast and the full-year consensus estimate.

YoY, its 1HFY23 revenue grew by 32% from increased new property sales, significantly enhancing property development revenue by 40%. This increase can be attributed by increase in offerings to cater to the affordable housing segment. However, the group’s operating margin stood at 13.7% (-1.0ppts) mostly due to property development margins which could be due to less favourable product mix. Overall, MAHSING’s 1HFY23 core net profit registered at RM100.5m (+16.6%).

Outlook. MAHSING will focus on the affordable segment alongside its product offering, known as “Luxury You Can Afford”. This approach has had a positive influence on its target market and is expected to give a positive impact in the coming years. YTD, the Group has acquired four parcels of lands in Puchong, Semenyih, and Kepong which collectively add up to an approximate GDV of RM5b, therefore strengthening the group’s land bank. In addition to the three existing launches YTD, MAHSING intends to launch future projects, namely M Nova (90% take-up rate for Tower A), M Minori, future phases of M Senyum, Meridin East, M Panora, and M Sinar. With the new launches planned for 2HFY23, the group is confident to meeting their full-year sales target of RM2.2b. As of 2QFY23, its unbilled sales of RM2.3b are expected to provide future revenue visibility over the next three years. On top of the residential development, MAHSING is also exploring opportunities to expand its industrial development portfolio. Meanwhile, its manufacturing division is experiencing losses with operating margin of -3.6%. This was mainly due to generally unfavourable glove selling prices and the group’s gloves division would likely to still incur losses in the coming quarters.

Forecast. Maintained.

However, we raise our TP by 14% to RM0.80 (from RM0.70) as we reduce the discount to RNAV for MAHSING from 65% to 60% to reflect the improved sentiment towards property stocks of late. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 5).

We like MAHSING for: (i) its lifestyle-focused products providing ease of entry for first-time home buyers, (ii) its efficient land bank management and turnaround which minimises carrying costs, and (ii) its strong balance sheet management by keeping its net gearing ratio in check, with a 2QFY23 reading of 0.12x being the lowest since creeping up to 0.34x in 2QFY22. That said, MAHSING is still relatively heavily exposed to high-rise residential properties which continue to be in a state of overhang in certain regions. Maintain MARKET PERFORM.

Risks to our call include: (i) persistent overhang in the high-rise segment, (ii) widening losses at its glove division due to persistent oversupply, and (iii) sustained elevated inflation and rising interest rates, hurting affordability.

Source: Kenanga Research - 29 Aug 2023