INVESTMENT HIGHLIGHTS

• 1HFY19 earnings broadly within expectation

• Earnings for 1HFY19 fell by 26% to RM104.8m

• 2QFY19 new sales at RM415.5m compared with RM300.5m qoq

• Maintain BUY with an unchanged TP of RM1.03

1HFY19 earnings broadly within expectation. Mah Sing Group Berhad (Mah Sing) 1HFY19 core net income (CNI) of RM104.8m was largely in-line with our expectation at 44% of our full year forecast and consensus’ at 52%.

Earnings for 1HFY19 fell by 26%yoy to RM104.8m in tandem with revenue that slipped 21%yoy to RM931.6m. This is mainly due to higher portion of the new sales that are at the initial stages of the construction such as M Vertica in Cheras and M Centura in Sentul. We expect progress billing of the on-going projects to accelerate in the coming quarters as construction progress picks up. Meanwhile, unbilled sales as of end-June stood at RM1.65b compared with RM1.58b in 1QFY19, providing less than one year of earnings visibility.

2QFY19 new sales at RM415.5m compared with RM300.5m qoq.

This brings ytd new sales to RM716m, which is on track to meet management’s yearly new sales target of RM1.5b. Among the projects that contributed to the new sales include M Vertica (RM258m), M Centura (RM103m), Sierra Perdana (RM70m) and Meridin East (RM67m). New launches to-date recorded at RM723m, out of which, 59% are projects in Greater KL such as M Vertica, Southville City and M Aruna. We expect the Home Ownership Campaign (HOC 2019), rolled out in March 2019, to continue to drive new sales in the coming quarters as seen in the 38% qoq improvement in new sales since the incentive was introduced. This is also supported by the affordable product target sales, out of which 50% are priced less than RM500k and 31% that are priced less than RM700k.

Maintain BUY with an unchanged TP of RM1.03. We make no changes to our earnings estimates as ytd CNI is considered in-line. We expect stronger earnings in 2HFY19 premised on higher progress billing. As such, we make no changes to our TP of RM1.03, which is based on RNAV discount of 53%. We maintain our BUY recommendation on Mah Sing due to its attractive valuation and stable new sales outlook. Mah Sing is trading at 60% discount to its NTA per share of RM1.45. Balance sheet of Mah Sing is sturdy at net cash position, which provides room for more strategic and fast turnaround landbanking exercises.

Source: MIDF Research - 3 Sept 2019