INVESTMENT HIGHLIGHTS

• 1QFY19 earnings slightly below our expectation

• Progress billing to pick up in the coming quarters

• 1QFY19 new sales at RM300.5m

• Earnings forecast revised downwards

• Maintain BUY with a revised TP of RM1.03

1QFY19 earnings slightly below our expectation. Mah Sing Group Berhad (Mah Sing) 1QFY19 core net income of RM55m came in slightly below our expectation, meeting only 19% of our full year forecast. The slight negative deviation was mainly attributed to slower-than-expected progress billing. Nevertheless, 1QFY19 earnings met consensus expectation at 24% of full year forecast.

Progress billing to pick up in the coming quarters. On yearly basis, 1QFY19 core net income was lower at RM55m (-15.7%yoy), in line with lower revenue of RM450.3m (-23%yoy). The lower earnings were due to higher proportion of new sales secured from new projects that were still at initial stages of construction. Looking forward, progress billing of on-going projects is expected to pick up in the coming quarters when construction momentum starts to pick up. Meanwhile, unbilled sales stood at RM1.58b in 1QFY19, providing less than one year of earnings visibility.

1QFY19 new sales at RM300.5m. Mah Sing recorded new property sales of RM300.5m in 1QFY19, slightly higher than new sales of RM285m in 4QFY18. New sales in 1QFY19 are within management full year new sales target of RM1.5b for FY19. Looking ahead, new sales are expected to be driven by Home Ownership Campaign (HOC 2019) which was rolled out in March 2019 and new project launches with combined GDV of RM1.8b for the rest of FY19.

Maintain BUY with a revised TP of RM1.03. We revise our FY19/20 earnings forecasts by -19.3%/-7.6% to take into account of the lower progress billing. Correspondingly, our TP is revised lower to RM1.03 from RM1.06 as we widen our RNAV discount slightly to 53% from 52%. Maintain BUY on Mah Sing due to its attractive valuation and stable new sales outlook. Mah Sing is trading at 38% discount to its NTA per share of RM1.45. Balance sheet of Mah Sing is sturdy at net cash position which will give it the financial muscle for more landbanking exercise.

Source: MIDF Research - 31 May 2019