KEY INVESTMENT HIGHLIGHTS

• 1QFY20 earnings below our expectation

• Earnings dragged by lower progress billing

• New sales target maintained at RM1.6b

• Earnings estimates revised downwards

• Maintain BUY with a revised TP of RM0.70

1QFY20 earnings below our expectation. Mah Sing Group Berhad (Mah Sing) 1QFY20 core net earnings of RM31.3m came in within below our expectation but within consensus’ at 13% and 22% of respective full year estimates. The negative deviation could be attributed to the weaker than expected progress billing in 1QFY20 as a result of Movement Control Order (MCO).

Earnings dragged by lower progress billing. 1QFY20 core net income was weaker at RM31.3m (-43.1%yoy), mainly due to delayed construction progress as MCO was imposed since 18th March 2020. Construction sites and sales offices were closed due to the imposition of MCO in response to Covid-19 pandemic and that had led to lower sales conversion and rate of works. Meanwhile, unbilled sales eased marginally to RM1.69b in 1QFY20 from RM1.73b in 4QFY19, providing less than one year of earnings visibility.

New sales target maintained at RM1.6b. Mah Sing registered new property sales of RM247m in 1QFY20, making up 15% of management new sales target of RM1.6b for FY20. Meanwhile, management is maintaining its new sales target despite disruption to business from MCO as new sales are expected to catch up in 2HFY20. Key planned new launches for the remainder of 2020 include M Adora in Wangsa Melawati, M Luna in Kepong, Carya in M Aruna, and remaining blocks of M Vertica in Cheras.

Maintain BUY with a revised TP of RM0.70. We revised our FY20/21F earnings forecasts by -42.2%/-21.5% to factor in the lower progress billing. Consequently, we revised downward our TP to RM0.70 from RM0.88 as we widen our RNAV discount to 68% from 60% in view of the muted earnings outlook. Nevertheless, we maintained our Buy call on Mah Sing as valuation is attractive following the steep decline in share price. Mah Sing is trading at 68% discount to its latest NTA of RM1.44 per share. Another catalyst would be its upcoming dividend payout of 3.35sen (ex-date: 15 September 2020) which translates into attractive yield of 7.2%.

Source: MIDF Research - 1 Jun 2020