INVESTMENT HIGHLIGHTS

• 9MFY16 core earnings within expectations

• Stable core earnings growth of 4%

• Management reduced sales target to RM1.8b

• Earnings estimates reduced for FY16 and FY17

• Maintain NEUTRAL with lower TP of RM1.57

9MFY16 core earnings within expectations. Mah Sing Group Berhad (MAHSING)’s 9MFY16 Core Net Income (CNI) of RM295m was within expectation as it accounted for 76% of ours and 79% of consensus full year estimates. As expected, no dividend is announced in the 3rd quarter.

Stable core earnings growth of 4%. MAHSING’s 9MFY16 CNI grew by 4% yoy to RM295m due to lower selling, marketing and administrative expenses. We like MAHSING strategy of controlling its cost at manageable level as this should allow the Company to sail through the current challenging market better against its peers.

Management reduced sales target to RM1.8b (from RM2.3b):Management has reduced its FY16 sales target to RM1.8b due to challenging market conditions coupled with uncertainties as a result of recent global and domestic developments, as well as lack of incentives in Budget 2017.

Earnings estimates trimmed for FY16 and FY17. FY16 core earnings estimate is trimmed by 4% to RM374m. For FY17, core earnings estimate is reduced by 9% to RM377m. We have lowered our sales assumption to RM1.8b for both FY16 and FY17.

Maintain NEUTRAL with lower TP of RM1.57: Our Target Price has been reduced to RM1.57 as we have increased the discount to RNAV to 25% (from 20%) to reflect the increasingly challenging property market. Despite the reduction in Target Price, we believe that MAHSING share price is supported by its decent dividend yield of 3.8%

Source: MIDF Research - 28 Nov 2016