Review

• Mah Sing’s 9M23 core net profit of RM150.5mn came in within expectations, accounting for 79% and 77% of our and consensus full-year forecasts, respectively.

• YoY, 9M23 revenue and core net profit increased 17% and 36% to RM1.9bn and RM150.5mn, respectively, driven by higher property sales and progressive revenue recognition from ongoing projects. The manufacturing segment exhibited a 61% reduction in operating loss, narrowing it to RM5.4mn from RM14.0mn in 9M22. This improvement was driven by ongoing efforts to enhance glove plant utilisation and cost management, resulting in improved productivity and operational efficiency. Furthermore, the stronger core net profit can also be attributed to the absence of distribution to perpetual securities holders, stemming from the full redemption of RM650mn perpetual securities on the initial call date of April 4, 2022.

• 3Q23 demonstrated a relatively steady performance, with a marginal core net profit decline of 1% to RM50mn, compared to 2Q23. More notably, its manufacturing segment returned to an operating profit of RM2.4mn compared to a loss of RM4.2mn a quarter ago due to narrower losses at the glove manufacturing sub-segment on effective cost-cutting measures as well as better contribution from the plastic manufacturing sub-segment.

• In 3Q23, Mah Sing achieved consistent new sales of RM600mn. This brought the YTD new sales for 9M23 to RM1.8bn, indicating a 10% YoY increase. M Astra, an affordable high-rise project in Setapak, was the largest contributor to sales in 9M23, accounting for 26% of total sales. Additionally, unbilled sales increased to RM2.42bn from RM2.34bn in the previous quarter, providing the group with over twelve months of earnings visibility or 1.3 times the FY22 property revenue.

Impact

• Maintain earnings forecasts.

Outlook

• Mah Sing reported impressive take-up rates above 90% for their new launches in 9M23, indicating the robust demand for affordable housing in urban areas. Having achieved 82% of its FY23 sales target in the 9M, Mah Sing appears on course to meet the RM2.2bn sales target. Moving forward, sales are expected to be further supported by the conversion of bookings (valued at RM400mn as of 24 Aug) and new projects lined up in 4Q worth approximately RM500mn.

• Despite Mah Sing's RM639.3mn acquisition spree this year, we do not anticipate that the company will need to raise additional equity for landbanking. This is owing to its solid balance sheet, which as of end Sep- 23 saw a low net gearing ratio of 0.13x and a cash balance of RM865mn. To date, Mah Sing has acquired 589 acres of land with a potential GDV of RM5.0bn. We understand that the group remains on the lookout to replenish its landbank in Klang Valley, Johor and Penang to expand its residential and industrial development portfolios.

• As far as the glove manufacturing business is concerned, management will remain focused on implementing cost reduction measures to improve the division's performance.

Valuation

• We maintain Buy on Mah Sing with an unchanged target price of RM0.95/share, based on a CY24 P/B multiple of 0.6x.

Source: TA Research - 30 Nov 2023