• Upgrade to BUY from Neutral, with unchanged MYR0.65 TP, 23% upside and c.6% FY23F yield. 3Q22 results were within expectations, and progress billings did not seem to be affected by the industry-wide labour shortages. 9M sales of MYR1.69bn is on track to meet management’s MYR2bn target for the year. The gloves manufacturing segment also saw better revenue and narrowing losses as more orders were secured. Mah Sing is now a BUY as the stock is a laggard following a strong rebound in the sector post 15th General Election.

• 3Q22 results. The QoQ growth in revenue was mainly driven by higher billings as well as stronger property sales from completed and near completed projects. While revenue for the manufacturing segment grew 5.3% QoQ, operating losses amounted to MYR5.03m (vs -MYR1.2m in 2Q22 and -MYR7.8m in 1Q22) as more orders were secured from the US. Management is hopeful to secure a few more orders so that the segment can approach the breakeven level soon. 3Q22 also saw a MYR10.97m insurance income and MYR4.3m inventories write-off that are related to a fire accident at Mah Sing’s plastics manufacturing plant. In line with the earlier guidance, cash balance picked up to MYR501m from MYR370m in 2Q22, due to the repayment of MYR650m perpetual securities in Apr. Net gearing is now at 0.27x from 0.34x in 2Q22.

• Sales momentum continued in 3Q22. New property sales in 3Q22 hit MYR640m (inclusive of MYR66m land disposal in Penang) vs MYR550m in 2Q22, bringing 9M total to MYR1.69bn. Key contributors included M Senyum (MYR256.5m) which was launched in 2Q22, Meridin East (MYR228.2m), M Vertica (MYR163.2m), Southville City (MYR144.6m), M Centura in Sentul (MYR140.3m), and M Luna in Kepong (MYR126.2m).

• Pipeline launches in 4Q22. In the pipeline, management is looking to roll out M Nova in Kepong, Phase 3 of M Senyum in Salak Tinggi and Phase 1B of M Panora in Rawang and Meridin East. Together with M Astra in Setapak that is currently under soft launch, the take-up from these projects are expected to drive sales in 4Q22, thus achieving management’s MYR2bn target by year end.

• Forecast. Our earnings forecasts are largely unchanged. Unbilled sales increased to MYR2.29bn vs MYR2.16bn as at 2Q22.

• Upgrade to BUY. Our SOP-based TP includes a 2% ESG premium given our ESG score of 3.10, using our in-house methodology. Trading at undemanding valuation, Mah Sing is a laggard play as the high-beta KL Property Index has rebounded by about 6%, vs FBMKLCI’s 2.3% post elections.

Source: RHB Research - 1 Dec 2022