Mah Sing’s 3Q15 results were within expectations. Maintain NEUTRAL and MYR1.49 TP (4% upside). We expect margins to contract slightly going into 2016 as the balance of the GST financial impact would be charged out; 9M new sales reached MYR1.6bn. Given the amount of pipeline projects, the company is likely to hit its MYR2.3bn sales target by year’s end; this is a 33% drop from 2014’s numbers.

Within expectations. Mah Sing’s 3Q15 results were in line with our and market’s expectations. A MYR5m goods and services tax (GST) financial impact provision was incurred and there is to be another MYR6m in 4Q. Gross margin contracted to 24.6% vs 27.5% a year ago. The margins compression trend is likely to continue going into 2016, as the balance of the GST financial impact – about MYR30m – would be charged out in budgeted cost of construction, ie cost of sales. It is currently charged as administrative expenses.

MYR640m new sales in 3Q15. New sales hit MYR640m (2Q15: MYR400m). Hence, 9M15 new sales amounted to MYR1.6bn, mainly contributed by Southville City (MYR408m), Lakeville Residence (MYR292m), M City (MYR215m) and D’sara Sentral (MYR173m). Sales in M City picked up substantially during the quarter, as construction progress for Blocks 1 and 2 are at an advanced stage. It was also due to a successful property roadshow in Hong Kong. Given the challenging market conditions, pipeline projects are mainly the mid-range, with pricing at around MYR600,000-700,000. These include D’sara Sentral service apartment, Lakeville Residence, and M Residence 3 link homes. The company is also previewing its Cerrado service apartment in Southville and Meridin East link homes in Pasir Gudang in December. Both would be priced at around the MYR400,000 level. As such, full-year sales are likely hit management’s MYR2.3bn target.

Forecasts. We make no changes to our forecast, as we had earlier imputed the GST financial impact into our FY16 numbers. Unbilled sales stayed relatively unchanged at MYR4.75bn (2Q15: MYR4.8bn).

Maintain NEUTRAL. We maintain our NEUTRAL rating and MYR1.49 TP, based on a 35% discount to RNAV.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

Mah Sing has many projects across the key states in Malaysia. The company, which adopts a fast turnaround model in property development, has both niche and township projects that underpin its earnings.

Recommendation Chart

Source: RHB Research - 30 Nov 2015