KEY INVESTMENT HIGHLIGHTS

• 9MFY20 earnings within our expectation

• Earnings recovered on resumption of construction activities

• New sales target maintained at RM1.1b

• Earnings estimates maintained

• Maintain BUY with an unchanged TP of RM1.07

9MFY20 earnings within our expectation. Mah Sing Group Berhad (Mah Sing) 9MFY20 core net income of RM35.9m came in below consensus expectation but within ours despite meeting 91% of our full year estimate as we expect 4QFY20 core net earnings to weigh by distribution to perpetual sukuk and securities of around RM26m. Note that we exclude impairment losses and distribution paid to perpetual sukuk and securities in our core net income calculations.

Earnings recovered on resumption of construction activities. Sequentially, 3QFY20 core net income surged to RM22.1m from core net income of RM1.9m in 2QFY20 due to resumption of construction activities. That brought cumulative earnings in 9MFY20 to RM35.9m (- 59.2%yoy). The lower earnings in 9MFY20 were mainly due to delayed construction progress in 2QFY20 as a result of MCO. Besides, earning were also partly dragged by lower earnings recognition from new projects such as M Oscar, M Arisa, M Luna and M Adora as the projects are at initial stages of completion. Meanwhile, unbilled sales increased to RM1.76b in 3QFY20 from RM1.64b in 2QFY20, providing one year earnings visibility.

New sales target maintained at RM1.1b. Mah Sing recorded strong property sales of RM428.5m in 3QFY20 against new property sales of RM171.6m in 2QFY20. Note that sales in 2QFY20 were weak due to imposition of MCO. That brought cumulative new sales in 9MFY20 to RM847.1m, on track to meet management new sales target of RM1.1b. Hence, management is maintaining new sales target of RM1.1b for FY20. Meanwhile, planned new launches for the remainder of 2020 include Carya link homes in M Aruna, Rawang and Acacia link homes in Meridin East, Johor.

Maintain BUY with an unchanged TP of RM1.07. We maintain our earnings forecasts for FY20/21F. We also maintain our TP for Mah Sing at RM1.07, based on sum-of-parts valuation. We expect positive earnings outlook for Mah Sing in FY21 due to earnings contribution from gloves manufacturing and recovery in property segment. Besides, sales outlook for Mah Sing is stable as its sales are on track to meet new sales target. Hence, we maintain our BUY call on Mah Sing.

Source: MIDF Research - 1 Dec 2020