INVESTMENT HIGHLIGHTS

• FY18 earnings within our expectation

• Weaker earnings in FY18

• Registered RM1.5b new sales in FY18

• Flattish new sales target at RM1.5b for FY19

• Maintain Neutral with an unchanged TP of RM1.05

FY18 earnings within our expectation. Mah Sing Group Berhad (Mah Sing) FY18 core net earnings of RM269.9m came in within our expectation, making up 98% of our full year forecast. Nevertheless, FY18 core net income is above consensus expectation as it makes up 112% of consensus estimate. Dividend of 4.5sen per share was proposed (slightly below our forecast of 5sen per share), translating into dividend yield of 4.5%.

Weaker earnings in FY18. On sequential basis, 4QFY18 core net income was higher at RM65.2m (+3.4%qoq). That brought cumulative earnings in FY18 to RM269.9m (-24.3%oy). The lower full year earnings were mainly due to lower earnings contribution from projects in Klang Valley as the projects were still at initial stages of construction. The lower earnings were also owing to higher marketing expenses and higher administrative expenses. Meanwhile, unbilled sales decreased marginally to RM2.38b in 4QFY18 from RM2.51b in 3QFY18, providing one year of earnings visibility.

FY18 new sales at RM1.5b. Mah Sing chalked up new property sales of RM285m in 4QFY18, slightly higher than new sales of RM275m in 3QFY18. That brought cumulative new sales to RM1.5b in FY18, which is slightly below our new sales target of RM1.6b. Approximately 83% of total new sales in FY18 were contributed by affordable residential projects priced below RM700k. Looking ahead, management targets to achieve flattish new sales of RM1.5b for FY19 with focus remains on affordable homes.

Maintain Neutral with an unchanged TP of RM1.05. We revise our FY19 earnings forecast marginally by -2.7% post release of FY18 full year figures and taking into account the lower new sales in FY18. We also introduce our earnings forecast for FY20. Our TP is unchanged at RM1.05, based on 52% discount to RNAV. We maintain our Neutral call on Mah Sing due to flattish new sales prospect. Balance sheet of Mah Sing remains healthy at net cash position.

Source: MIDF Research - 28 Feb 2019