• Maintain BUY, with new TP of MYR1.15 from MYR1.12, 18% upside and c.4% yield. Mah Sing’s 4Q23 results beat expectations. FY23 property sales achieved MYR2.26bn, while the strong sales growth from the Johor region reaffirms our positive view on Iskandar Malaysia. FY23 also saw improvement in profit margin, net gearing, with higher DPS. Management has set a higher sales target of MYR2.5bn for FY24F, and we think there could be potential upside surprise from Mah Sing Business Park in Sepang upon its launch in late 2024.

• 4Q23 results. The sequential growth in 4Q23 revenue was largely driven by higher sales of completed and nearly completed products. EBIT for the property development segment was higher due to the realisation of cost savings after the finalisation of accounts of certain projects (M Adora and M Vertica) that were completed in earlier quarters. Meanwhile, the manufacturing segment reported EBIT positive (+MYR0.41m) for the second consecutive quarter (MYR2.4m in 3Q23) as management continued to drive its cost optimisation initiatives in gloves manufacturing (such as raising productivity of each production line). Unsold completed inventory remained relatively stable at MYR529.7m vs (vs MYR537.1m in 3Q23). Net gearing continued to fall to 0.08x from 0.13x in 3Q23 due to the return of cash flow after the completion of various projects during the year. A DPS of 4 sen was declared for FY23, higher than 3 sen for FY22.

• Stronger property sales in 4Q23. New property sales achieved MYR460m in 4Q23 vs MYR600m in 3Q23. Full-year property sales hit MYR2.26bn (vs MYR2bn in FY22, excluding MYR115m land sales), exceeded management’s target slightly. FY23 property sales were largely contributed by M Astra in Setapak (MYR513m), M Senyum in Salak Tinggi (MYR255m), M Vertica in Cheras (MYR254m), and M Nova in Kepong (MYR212m). The Johor region continued to see stronger growth in sales, contributing MYR586m (+59% YoY), or 26% of total sales. Meridin East alone received MYR402m in sales (from MYR244m in FY22).

• Expect more landbanking activities this year. Mah Sing’s solid balance sheet and incoming free cash flow of MYR500m as a result of completion of projects should boost the company’s war chest to acquire more landbank. This could potentially provide further upside to our RNAV estimate.

• Forecasts. We raise our FY24F-25F earnings by 6-7% in view of the stronger sales momentum and recovery in profit margin. Unbilled sales fell slightly to MYR2.33bn from MYR2.42bn as at 3Q23.

• Higher TP. Our SOP-based TP is now higher after we update for the latest financials. The discount to RNAV for the property development segment is unchanged at 50%.

Source: RHB Research - 28 Feb 2024