Investment Highlights

• We maintain BUY on Mah Sing Group (Mah Sing) with a unchanged SOP-based fair value (FV) of RM2.11/share base on a 30% discount to our SOP-based valuation of RM116mil came within expectations, comprising 48% of both our full-ye forecast and street’s.

• YoY, the group’s 1HFY24 CNP rose 19% despite a 12% declin in revenue from a higher proportion of new sales secured fro new projects, in which contribution to revenue is expected increase once projects advance beyond the initial stages construction.

• However, the group’s CNP margin improved to 10% in 1HFY2 from 7.5% in 1HFY23 mainly due to the recognition of co savings from the finalisation of construction costs for Senso (Tower B) in Southville City, M Oscar in Sri Petaling, Merid East (Parcel 2H) in Johor Bahru, M Luna in Kepong, M Arisa Sentul and M Senyum Phase 1A in Salak Tinggi.

• Year-to-date, Mah Sing has secured new sales of RM1.7b attaining 66% of its FY24F sales target of at least RM2.5bil. Ma Sing launched RM2.il worth of properties in 8MFY2 accounting for 71% of its FY24F planned launches of RM2.

• We believe Mah Sing is well ahead of its FY24F sales targ with the anticipation of robust sales of affordable homes 2HFY24 amid strong takeup rates of over 90%. This supported by multiple planned launches, including M Aspi and Residensi Suria Madani in Taman Desa, M Azura Setapak, M Terra in Puchong, M Tiara in Johor Bahru, M Sin Southville City in Bangi and M Zenya in Kepong and M Lega in Semenyih.

• QoQ, the group’s unbilled sales were inched up from RM2.3b as at 31 March 2024 to RM2.4bil, which represents a fair cov ratio of 1x FY24F property development revenue.

• In 2QFY24, Mah Sing’s revenue climbed 3.6% QoQ RM578mil, which supported CNP increase of 6% YoY main from the momentum of 1HFY24 sales and work progress. Th was partly dampened by the manufacturing division reversin to loss of RM1.2mil in 2QFY24 from an operating profit RM0.7mil in 1QFY24 as the segment’s revenue declined 8 due to shipping delays caused by the Middle-East conflict.

• We like management’s savvy pivot towards data centre (DC themed plays with plans to offer up to 500MW capacity pow supply to investors in Southville City in Selangor, an separately leveraging on its substantive Meridin East landban in Johor Bahru for monetisation plans .

• The initial collaboration with Bridge Data Centre for up to 100MW on 17.6 acres in strategically located Southville City has paved the way for another DC project of up to 90MW, currently in advanced negotiations. As the Meridin East township in Johor has a power supply of 300MW, Mah Sing is in negotiation with a DC player to sell 42 acres of land which we estimate could generate a disposal gain of over RM100mil – 42% of FY24F net profit.

• The stock currently trades at a bargain FY25F P/E of 14x vs. a 4-year peak of 19x and a fair dividend yield of 3%. We believe the mid-to-long term outlook for Mah Sing remains positive, backed by its:
  
  i) Rapid execution and quick turnaround business model;
  
  ii) Strong focus on affordable properties at strategic locations which have strong demand, and
  
  iii) Market-savvy entrepreneurship, demonstrated by management’s venture into Malaysia’s booming data centre industry with Bridge Data Centres Malaysia (Bain Capital) in Southville City, Dengkil, Selangor.

Source: AmInvest Research - 30 Aug 2024