Review

• Stripping off the exceptional items amounting to RM4.1mn, Mah Sing’s 1H24 core net profit of RM115.6mn (+15% YoY) came in within expectations, accounting for 52% and 48% of ours and consensus’ full-year forecasts, respectively.

• YoY, 1H24 revenue declined 12% YoY to RM1.3bn due to lower property development revenue as more projects were in early construction stages. Despite this, core net profit rose 15% YoY to RM115.6mn, driven by 1) better property development margins from cost savings on finalised construction contracts, and 2) a lower effective tax rate.

• QoQ, 2Q24 revenue and net profit increased 4% and 6%, respectively, largely attributed to higher revenue from the property development segment.

• In the first eight months of 2024, Mah Sing achieved RM1.66bn in new sales. The largest contributor was M Minori, an affordable high-rise project in Johor Bahru, accounting for 20% of total sales. The latest unbilled sales were stabled at RM2.4bn, providing the group with over twelve months of earnings visibility or 1.2xthe FY23 property revenue.

Impact

• Maintain earnings forecasts. Briefing Highlights

• We gather that the group's recent launches have consistently shown strong market acceptance, maintaining an impressive uptake rate of over 90%, indicating that the demand for affordable housing in urban areas remains robust. With 8M sales already accounting for 66% of the group's FY24 sales target, we believe Mah Sing is on track to achieve its sales target of at least RM2.5bn.

• In response to DBKL's recent suspension of approvals pending geotechnical studies, management has confirmed that all Mah Sing projects in Kuala Lumpur, including the new M Aspirasi at Taman Desa, have already secured development orders. The geotechnical studies for these projects have been completed and fully approved by both Jabatan Mineral dan Geosains Malaysia and DBKL, ensuring they meet the latest regulatory standards.

• In May 2024, Mah Sing unveiled the Mah Sing DC Hub@Southville City, a 150-acre development that will provide up to 500MW of data centre capacity. The group's initial collaboration with Bridge Data Centres (BDC), covering 17.55 acres for up to 100MW, marks the beginning of potential future partnerships with leading data centre operators. Management has shared that BDC is currently in discussions with potential offtakers to finalise the terms and details of the data centre, with the target commencement of operations within 12-18 months still on track.

• We are positive about this development as it signifies a strategic shift for Mah Sing, diversifying its revenue streams by leveraging its landbank to establish recurring income from data centres. This venture also opens up possibilities for similar developments at other sites, such as MSS Business Park in Sepang.

• Mah Sing's balance sheet remains solid, which, as of the end of June 24, saw a low net gearing ratio of 0.1x and a cash balance of RM911mn. Despite acquiring three new lands this year, with an anticipated GDV of RM3.2bn, Mah Sing is actively seeking opportunities to further enhance its landbank in key areas such as Klang Valley, Johor, and Penang. This strategic approach aims to expand the company's residential and industrial development portfolios.

Valuation

• We maintain Buy on Mah Sing with an unchanged TP of RM2.11/share, based on SOP valuation.

Source: TA Research - 2 Sept 2024