• Maintain BUY, TP rises to MYR1.55 from MYR1.15, 30% upside with c.4% FY24F yield. We turn more bullish on Mah Sing, after a recent update over lunch with its senior management team. Our new TP reflects its exciting prospects on the industrial front, stronger war chest for landbanking, the strategic cost optimisation for the glove manufacturing segment, as well as the potential review of the frequency of its dividend payouts. Our TP is now based on a 35% discount to RNAV (from 50%), ie similar to the discount applied when its valuation was at a previous peak level.

• Exciting prospects for strategically located land in the Klang Valley. The value of the company’s Klang Valley landbank has yet to be unlocked. At yesterday’s luncheon meeting, we learned that certain parcels of Mah Sing’s Southville development (316 acres) in Bangi secured the provision of high power supply during the upfront infrastructure stage many years ago. Such a feature significantly enhances the value of these commercial parcels of land today. As the commercial component of the Southville development is located closer to Cyberjaya, while the power transmission line is at the boundary of the land, management has seen strong interest from local and foreign players recently – since the location and power supply are top priorities for many industrial players. We expect some positive news flow on this to come in 2H24.

• Mah Sing Business Park (MSBP) in Sepang may be the next catalyst. Given its size of 562 acres, MSBP may comprise smaller industrial parks within the entire development - as Mah Sing’s collaboration with a China party may lead to some interested parties taking up a portion of land to set up their own industrial cluster. We think this is timely, as 2024 also marks the 50th anniversary of the establishment of diplomatic relations between Malaysia and China.

• New land may provide further upside to our RNAV estimate. With MYR500m free cash flow in hand for FY24 (due to the completion of various projects), management has been on the lookout for new land in the Klang Valley and Johor, for both township and industrial developments. The company’s net gearing of only 0.08x also gives it ample capacity to gear up if strategic opportunities arise.

• Waiting for the ASP of its gloves to recover. High-quality niche products as well as cost efficiency should accelerate the turnaround of Mah Sing’s glove manufacturing business. Management indicated that as soon as ASP recovers to over USD16.50/1k pieces, this segment should undergo a more sustainable earnings recovery. Note that, in 4Q23, its manufacturing segment was EBIT-positive (+MYR0.41m).

Source: RHB Research - 27 Mar 2024