INVESTMENT HIGHLIGHTS

• FY16 core earnings within expectations

• Core earnings declined slightly

• Achieved RM1.78b sales in FY16

• Set sales target of RM1.8b for FY17

• Maintain NEUTRAL with lower TP of RM1.57

FY16 core earnings within expectations. Mah Sing Group Berhad (MAHSING)’s FY16 Core Net Income (CNI) of RM361m was within expectation as it accounted for 100% of ours and 102% of consensus estimates. As expected, a 6.5 sen dividend is announced. In our CNI calculation, we have excluded loss on repurchase of bond (RM27.1m), reversal of doubtful debts (RM7.6m), fair value gain on investment properties (RM5.0m) and net forex gain (RM2.6m).

Core earnings declined slightly. FY16 CNI declined 7% yoy to RM361m due to 5% drop in revenue. The lower revenue is caused by lower contribution from M City in Jalan Ampang and Icon City in Petaling Jaya that were at tail end of development.

Achieved RM1.78b sales in FY16. The Company secured RM1.78 worth of sales in FY16 and this is close to management target of RM1.8b. Greater KL contribution to sales is the biggest with RM1.2b sales (67% contribution) followed by Johor (RM426m sales –> 24% contribution) and Penang (RM147m – 8% contribution).

Set sales target of RM1.8b for FY17. Looking forward, MAHSING has set its sales target of RM1.8b for FY17. We believe that the target is prudent in view of challenging market conditions. FY17 earnings estimate is maintained at RM377m. We have also introduced our FY18 estimate of RM397m. Net gearing is at comfortable ratio of 0.02x.

Maintain NEUTRAL with TP of RM1.57: Our Target Price is maintained at RM1.57 based on discount to RNAV of 25% to reflect the increasingly challenging property market. While FY16 sales is lower yoy, its downside is limited due to decent dividend of 3.9%

Source: MIDF Research - 1 Mar 2017