INVESTMENT HIGHLIGHTS

• 1HFY18 earnings slightly below our expectation

• Earnings contributed by Klang Valley projects

• 1HFY18 new property sales on track

• Earnings forecast reduced

• Maintain BUY with a revised TP of RM1.49

1HFY18 earnings slightly below our expectation. Mah Sing Group Berhad (Mah Sing) 1HFY18 core net earnings of RM141.3m came in slightly below our expectation, making up 44% of our full year forecast as the anticipated higher progress billing came in slower than expected. Nevertheless, 1HFY18 core net income is within consensus expectation as it makes up 48% of consensus estimates.

Earnings contributed by Klang Valley projects. Mah Sing 2QFY18 core net income climbed 17%qoq to RM76.3m due to higher progress billing and recognition of cost savings arising from the finalisation of construction contracts. That brought cumulative earnings to RM141.3m in 1HFY18 (- 22%yoy). The lower earnings in 1HFY18 were due to lower contribution from new projects that were at their initial stage of construction. Klang Valley projects remain the key earnings contributor in 1HFY18. Meanwhile, unbilled sales increased marginally to RM2.65b in 2QFY18 from RM2.6b in 1QFY18, providing 1 year of earnings visibility.

1HFY18 new property sales on track. Mah Sing recorded new property sales of RM472m in 2QFY18, flattish against new sales of RM470m in 1QFY18. That brought total new sales to RM942m in 1HFY18 which is in line with our and management sales target of RM1.8b. Looking ahead, management plans to launch projects with total GDV of RM1.2b in 2HFY18. Key upcoming launches in 2HFY18 include M Centura, M Vertica, Sensa Residence, Cerrado Residential Suites Tower C and D, M Aruna 2-storey link homes and 2-storey link homes in Meridin East.

Maintain BUY with a revised TP of RM1.49. We revise downwards our earnings forecast for FY18/19 by -6.2%/-8.6% to reflect the lower progress billing. We revised our TP for Mah Sing to RM1.49 from RM1.60 as we widen RNAV discount from -30% to -35% in view of the slightly weaker earnings outlook. Nevertheless, we maintain our BUY call on Mah Sing due to its attractive valuation (trading at 16% discount to NTA) and decent dividend yield of 5.5%.

Source: MIDF Research - 3 Sept 2018