KEY INVESTMENT HIGHLIGHTS

• FY19 earnings above expectations

• Earnings helped by lower expenses

• New sales target of RM1.6b for FY20

• Earnings estimates revised upwards

• Maintain BUY with an unchanged TP of RM0.88

FY19 earnings above expectations. Mah Sing Group Berhad (Mah Sing) FY19 core net income of RM234.3m came in above expectations, making up 113% and 111% of our and consensus estimates. The positive deviation was mainly due to the lower than expected expenses. Dividend of 3.35sen per share was announced, translating into dividend yield of 5%.

Earnings helped by lower expenses. On sequential basis, Mah Sing recorded higher core net income of RM82.2m (+73.6%qoq) on the back of higher topline of RM442.6m (+6.5%qoq) mainly due to pick up of progress billing. That brought cumulative earnings to RM234.3m (- 13.2%yoy), in line with lower topline (-18%yoy). The lower earnings in FY19 were mainly owing to lower contribution from property development division as new sales secured from new projects namely M Vertica and M Centura are still at initial stages of construction. Meanwhile, hotel division was in the red due to guarantee rental return. Nevertheless, FY19 earnings were helped by lower selling and marketing expenses (-38%yoy). On the other hand, unbilled sales stood at RM1.73b in 4QFY19, providing one year of earnings visibility.

New sales target of RM1.6b for FY20. Mah Sing recorded new property sales of RM364m in 4QFY19, lower than new sales of RM420m in 3QFY19. That brought total new sales to RM1.5b which met management’s sales target of RM1.5b. Looking ahead, management set new sales target at RM1.6b for FY20 on the back of launches with total GDV of RM2.1b. Mah Sing remains focus on greater KL as 78% of its new launches in FY20 will be in greater KL.

Maintain BUY with an unchanged TP of RM0.88. We revise upwards our earnings forecast for FY20F by 1.4% as we factor in lower expenses. We also introduce our earnings forecast for FY21F. We maintain our BUY recommendation on Mah Sing as its strategy of launching affordable products should support its sales outlook. Besides, dividend yield is also attractive at 5%.

Source: MIDF Research - 2 Mar 2020