INVESTMENT HIGHLIGHTS

• 9MFY17 earnings within expectations

• Local projects contributing earnings

• 9MFY17 new sales at RM1.26b

• Expect strong sales in 4QFY17

• Upgrade to BUY with a revised TP of RM1.68

9MFY17 earnings within expectations. Mah Sing Group Berhad (Mah Sing) 9MFY17 core net profit of RM265.6m (-10%yoy due to higher expenses) came in within expectations, making up 71% and 77% of our and consensus full year estimates. As expected, no dividend declared for the quarter.

Local projects contributing earnings. In 9MFY17, earnings of Mah Sing mainly contributed by its projects in Greater KL and Klang Valley while projects in Penang, Iskandar and Sabah were also contributing to the earnings. Meanwhile, unbilled sales declined from RM3.02b in 2QFY17 to RM2.83b in 3QFY17, providing 1.08 years of earnings visibility.

9MFY17 new sales at RM1.26b. Mah Sing recorded new property sales of RM440.7m in 3QFY17, higher than new sales of RM409m in 2QFY17. That brings total new sales to RM1.26b in 9MFY17, lower than new sales of RM1.4b in 9MFY16. In 9MFY17, 63% of the total new sales were contributed by projects in greater KL, 23% from projects in Johor, 12% from projects in Penang, and remaining 2% from project in Sabah. The total new sales in 9MFY17 is within expectations, making up 70% of management sales target of RM1.8b.

Expect strong sales in 4QFY17. We expect strong property sales in 4QFY17 mainly driven by launches of M Centura in Sentul. Note that M Centura is a mass-market project with selling price starting from RM328,000. Meanwhile, Tower A of M Vertica (GDV: RM700m) in Cheras comprising 808 units recorded a strong take up rate of 85% on 2-day preview recently. M Vertica is strategically located in Cheras with affordable selling price starting from RM450,000.

Upgrade to BUY with a revised TP of RM1.68. We maintain our earnings forecast for FY17/18. We are upgrading Mah Sing to BUY with a revised TP of RM1.68 (previously: RM1.59) as we narrow discount to RNAV from 25% to 20% following better property sales prospect of Mah Sing. We like the company’s strategy in targeting mass-market projects in Klang Valley as it should support its sales outlook in view of good demand for affordable houses. Besides, balance sheet of Mah Sing is strong at net cash position, giving Mah Sing financial muscles for more land banking opportunities.

Source: MIDF Research - 30 Nov 2017