• Maintain BUY, new TP of MYR0.98 from MYR0.77, 23% upside and 6% FY22F yield. Mah Sing’s 2Q23 results are within expectations. 1H23 sales already hit MYR1.2bn, and the company should achieve its MYR2.2bn sales target by year-end. Management had earlier indicated its intention to expand the industrial portfolio, and we think this could potentially be a share price catalyst – especially if tenants or clients are secured upfront. We raise our TP to reflect better market sentiment ahead, given the lifting of the political overhang post state elections.

• 2Q23 results. 2Q23 revenue was very much flat from the previous quarter. Meanwhile, revenue for the manufacturing segment dropped by about 9% QoQ, while operating losses still remained at c.MYR4m per quarter (2Q23’s -MYR4.2m vs 1Q23’s -MYR3.7m). Mah Sing’s cash position strengthened, given the timely project completions and vacant possession of properties YTD. Unsold completed inventory stood at MYR579.3m, compared with MYR674.3m in FY22. Net gearing also fell to 0.12x, from 0.20x in 1Q23.

• Sales remained steady. The company’s new property sales came up to MYR600.4m vs MYR600.6m in 1Q23. Key contributors included the following projects: M Astra (MYR345m), Meridin East (MYR202m), M Vertica (MYR150m) and M Senyum (MYR139m). Demand for mid-range housing is still strong, as M Nova in Kepong – launched earlier this month – had a take-up of 90% for its Tower A.

• Healthy pipeline of launches. In 2H, upcoming launches include M Minori in Johor Bahru, future phases of M Senyum, Meridin East, M Panora and M Sinar. The four parcels of land acquired so far this year (in Puchong, Johor Bahru, Semenyih and Kepong) should yield a GDV of MYR5bn in total. This should underpin property sales and earnings over the medium/long term.

• Forecast. In view of the resilient earnings in 1H, we raise our FY23-25 earnings forecasts by 4-7%. Unbilled sales for 2Q23 rose to MYR2.34bn, from MYR2.26bn as at 1Q23.

• Higher TP. Our SOP-based TP includes a lower 55% discount to RNAV (from 65%), and a 0% ESG discount/premium imputed, since our ESG score of 3 out of 4 for the company is in on par with the country median.

Source: RHB Securities Research - 29 Aug 2023