• Maintain NEUTRAL and MYR0.65 TP, 8% upside with 5% FY22F yield. Mah Sing’s 2Q22 results are in line. Management is on track to meet its MYR2bn sales target as 1H sales already reached MYR1bn, and there are MYR780m of sales to be converted. The glove manufacturing segment also saw narrower losses due to some cost-control measures and higher production volume. Given the success of the M-series projects so far, it will likely replenish the landbank intended for its M-series products in the coming months.

• 2Q22 results. The QoQ growth in revenue was mainly attributed to stronger property sales, as well as higher billings from completed and almost completed projects. Operating losses from the manufacturing segment narrowed to MYR1.2m, from -MYR7.8m in the previous quarter, as production volume has ramped up slightly, as well as some cost control measures in place. Headline net profit included a MYR6.1m write-off of plant & machinery related to a flood that affected its plastic manufacturing plant. Including other related miscellaneous expenses, the insurance income of MYR12.7m neutralised the impact. The company’s cash balance fell to MYR370m from >MYR1bn in 1Q22, due to the repayment of MYR650m on perpetual securities in April. Management indicated that the cash position should pick up in 2H, as cash flow from operations gain momentum. Its net gearing is now at 0.34x, from 0.15x in 1Q22.

• Stronger sales in 2Q22. New property sales amounted to MYR550m, vs MYR450m in 1Q22. Key projects that contributed to sales include Southville City (MYR103.4m), M Luna in Kepong (MYR91m), M Centura in Sentul (MYR99m), and Meridin East (MYR161m). The maiden launch of M Senyum during the quarter also contributed MYR101m in sales.

• >MYR1bn of GDV to be launched in 2H. About MYR400m worth of projects has been launched in 1H. The company recently opened its M Nova sales gallery in Taman Wahyu in June to promote M Nova which is near M Luna Kepong. Besides this, other pipeline launches include M Astra in Setapak (high-rise), M Panora in Rawang (landed homes), Phase 2 and 3 of M Senyum in Salak Tinggi (landed homes) and new phases in Meridin East Johor (landed homes).

• Forecast. We maintain our earnings forecasts. Unbilled sales rose slightly to MYR2.16bn, from MYR2bn as at 1Q22.

• Maintain TP. Our TP is based on a SOP calculation, which has: A 75% discount applied to RNAV for the property division, 7x P/E for the plastic segment, and 5x P/E for the glove segment. Our TP also includes a 2% ESG premium – given our ESG score of 3.10, using our in-house methodology.

Source: RHB Research - 30 Aug 2022