KEY INVESTMENT HIGHLIGHTS

• 9MFY19 earnings below our expectation

• Earnings eased on lower progress billing

• New property sales on track

• Earnings estimates reduced

• Maintain BUY with a revised TP of RM0.88

9MFY19 earnings below our expectation. Mah Sing Group Berhad (Mah Sing) 9MFY19 core net income of RM151.9m came in below our expectation, meeting only 64% of our full year estimate. The negative deviation could be attributed to the slower than expected progress billing in 3QFY19. Nonetheless, the 9MFY19 earnings came in above consensus estimate.

Earnings eased on lower progress billing. On sequential basis, 3QFY19 core net income eased 5%qoq to RM47.3m as progress billing was lower. Similarly, 3QFY19 core net income was lower on yearly basis at -5%yoy, bringing cumulative core net income to RM151.9m (- 25.9%yoy). The lower earnings in 9MFY19 were due to higher proportion of new sales secured from new projects such as M Vertica in Cheras and M Centura in Sentul which are still at initial stages of construction. Meanwhile, unbilled sales stood at RM1.7b in 3QFY19, providing less than one year of earnings visibility.

New property sales on track. Mah Sing recorded new property sales of RM420m in 3QFY19, flattish against new sales of RM415.5m in 2QFY19. That brought cumulative new sales to RM1.136b, on track to meet management full year new sales target of RM1.5b. Among the projects that contributed to the new sales include M Vertica, M Centura, and Meridin East. Looking forward, new sales in 4QFY19 are expected to contribute by launches of M Oscar in Sri Petaling and M Arisa in Sentul.

Maintain BUY with a revised TP of RM0.88. We revise down our earnings forecasts for FY19/20F by 12.7%/12.2% to factor in the lower progress billing. Correspondingly, we revise down our TP for Mah Sing to RM0.88 from RM1.04 as we widen our RNAV discount to 60% from 53%. Nevertheless, we maintain our BUY recommendation on Mah Sing as its sales outlook remains stable, underpin by its launches of affordable products. Moreover, balance sheet of Mah Sing is sturdy at net cash position.

Source: MIDF Research - 28 Nov 2019