MAHSING’s 1HFY24 results met expectations. Its 1HFY24 revenue declined 12% YoY with ongoing projects mostly at early stages of construction. However, CNP rose 20% from better and higher-margin products. It is venturing further into the data centre space including possible land sale opportunities its Meridin East township in Johor. We maintain our forecasts and TP of RM1.87. Upgrade to OUTPERFORM (from MARKET PERFORM).

MAHSING’s 1HFY24 core net profit of RM120.3m met expectations at 49% and 50% of our full-year forecast and the full-year consensus estimate, respectively.

YoY, its 1HFY24 revenue declined 12% on slower progress billings as most of its on-going projects are new and at early stages of construction. However, its 1HFY24 core net profit rose 20%, thanks to a better product mix with more higher-margin products.

QoQ, its 2QFY24 revenue rose 4% as property sales and construction progress picked up during the quarter. However, its core net profit remained flat no thanks to higher operating expenses.

Outlook. MAHSING is on track to meet its minimum sales target of RM2.5b, booking in RM1.6b of property sales as of August 2024 - usually the second half of the year contributes 55%-65% of full-year sales. Meanwhile, its unbilled sales stand at RM2.4b.

In FY24, MAHSING intends to launch seven new projects totalling RM2.8b. Of this, 61% of the total planned launches are in Klang Valley with 72% priced below RM500k.The products will cater to diverse market segments, particularly affordable housing and first- time home buyers.

In its data centre strategy, the group expects its portfolio to enhance long-term earnings through recurring income and value-unlocking opportunities. They plan to expand its data centre operations in Southville City for another 90MW and at Meridin East in Johor via land sales there, which is currently in discussions with another player.

Forecast. Maintained.

Valuations. We maintain TP of RM1.88 as we apply a 30% discount to its RNAV to reflect improved realisability of its GDV. At 30%, the discount is narrower than the industry average of 55%. There is no adjustment to our TP based on ESG given a 3-star rating appraised by us (see page 5).

Investment case. We like MAHSING for: (i) its focus on affordable products targeting first-time house buyers, and (ii) sound land bank management and turn-around which minimises carrying costs, (iii) a strong war chest for land acquisitions underpinned by a clean balance sheet, and (iv) more significant recurring income stream following the venture into data centre. Upgrade to OUTPERFORM (from 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 mortgage rates, hurting affordability.

Source: Kenanga Research - 3 Sep 2024