Mah Sing Group Bhd (May 26, RM1.50)

Maintain outperform with an increased target price (TP) of RM1.72: While the Malaysian property market continues to face challenges in 2016, Mah Sing Group Bhd remains our top pick. We like Mah Sing’s focus on affordable housing (approximately 50% of financial year 2016 [FY16] launches) in key economic areas, especially the central region.

We reiterate our “outperform” rating on Mah Sing with a fair value of RM1.72 per share, a 30% discount to its realised net asset value estimate of RM2.45 per share.

We forecast Mah Sing’s FY16 sales at RM2.32 billion (+0.9% year-on-year [y-o-y]), with a total revenue of RM3.3 billion (+6% y-o-y). We believe the strategic locations of its projects, mostly in the central region, combined with affordable pricing, will boost the company’s overall take-up rates. In addition, its 4.4% FY16 dividend yield will provide additional support to the share price. Against this backdrop, we maintain our “outperform” rating.

Mah Sing has a weighted average take-up rate of 90% across its portfolio of 23 projects, much above Malaysia’s average of 63%, as per data from the National Property Information Centre. The central region projects such as Southville, D’Sara Sentral and Lakeville Residence anchored FY14 and FY15 sales with their total contributions reaching almost 50%. We estimate the Southville project alone will contribute 30% of FY16 to FY18 sales annually. Notably, 64% of Mah Sing’s projects are located in the central region.

Unbilled sales of RM4.75 billion (1.8 times revenue from property development in FY15) will provide a fillip to the company’s earnings for at least the next three years. Mah Sing currently sits on a 2,470-acre (999.57ha) land bank portfolio, of which 75% is still at the initial life cycle stage. We believe it has the right strategy and ammunition to sustain growth going forward. — Macquarie Research, May 25

Mah Sing 

This article first appeared in The Edge Financial Daily, on May 27, 2016. Subscribe to The Edge Financial Daily here.

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