• Maintain BUY, with new MYR0.77 TP from MYR0.65, 21% upside and c.5% yield. Our TP is now based on a 65% discount to RNAV (from 75% for the property segment), with a 2% ESG premium. We think Mah Sing should trade at this pre-pandemic valuation, given its healthy sales momentum, more landbanking, and potential rebound for gloves’ ASP. We are hopeful that the collaboration with the China Electronics Chamber of Commerce (CECC) can progress further and potentially lead to the group’s greater involvement in industrial property development.

• Keeping property sales momentum. After hitting MYR2.12bn sales in FY22 (MYR2.2bn sales target for FY23), property sales momentum continued to be encouraging this year. It was reported that the M Vertica project in Cheras and M Astra in Setapak saw very encouraging take-up rates in Dec 2022 and Mar 2023, prompting the group to open up for sale the final tower in both projects. Management alluded that industry loan approval rate has improved, resulting in better conversion of bookings into contractual sales for the company.

• ASP for gloves starts stabilising. Meanwhile, we expect a gradual improvement for the group’s glove division (refer to our report dated 27 Mar 2023 Rubber Products : Swimming Across The Red Sea; U/G To NEUTRAL). We understand that industry ASP has started to bottom out and stabilise at around USD21/1k pieces for standard gloves, and at the same time, the group is also implementing some cost containment measures. Hence, as volume improves, we believe the losses for the manufacturing division will narrow down faster, while the plastic manufacturing business remains steady.

• More landbanking for landed and high-rise affordable housing. Management is likely to purchase more land parcels for development after acquiring the Puchong land in January. This will likely be an upside catalyst for the group’s RNAV as its M series projects have been quite successful, and therefore landbank turnaround time will be fast and efficient.

• Collaboration with CECC may open up more development opportunities. We are upbeat with Mah Sing’s collaboration with CECC. During the recent China visit, Group MD Tan Sri Leong Hoy Kum showed support and the group will co-operate with CECC members – from sourcing for land, the setting up of production facilities to the export of goods for international markets. We understand that CECC has about 40k members, and given the ongoing US-China trade war, Malaysia may benefit as some manufacturers based in China have decided to relocate. This potential tie- up may open up opportunities for the group to expand its industrial development in future, and this segment is now gaining traction in the real estate industry.

Source: RHB Research - 17 Apr 2023