Mah Sing Group Bhd (Jan 3, 91 sen)

Maintain buy with an unchanged fair value of RM1.21: We recently met up with Mah Sing Group and was given updates on the company’s plan for 2019. We believe the outlook on Mah Sing remains positive in the mid to long term with the company’s clear direction towards affordable housing where the real demand is.

Moreover, its quick turnaround business model limits its exposure to land withholding risks, resulting in better cash flow management.

Mah Sing has lined up several launches in 2019 with the key selling points being: (1) affordability; and (2) strategic locations. In the central region, Mah Sing will roll out M Vertica Cheras Phases 3 & 4 (high-rise residential, starting price RM451,000), M Centura Sentul Phase 2 (high-rise residential, starting price RM350,000), Sensory Residence, Southville City KL (high-rise residential, starting price RM344,000), Basil @ M Aruna, Rawang (landed residential, starting price RM550,000) M Cahaya, Sungai Buloh (high-rise residential, starting price RM250,000) and Icon City PJ Phase 2 (commercial).

New projects in the northern region set to be launched in 2019 are Southbay City, Penang (high-rise residential, starting price RM600,000) and Icon Residence, Georgetown Penang (high-rise residential, starting price RM1 million).

Meanwhile in the southern region, Mah Sing will launch the Orchid and Hazel @ Meridin East, Johor (landed residential, starting prices RM450,000 and RM487,000 respectively).

To recap, Mah Sing chalked up new sales of RM1.22 billion on cumulative nine months of financial year 2018 (9MFY18), and is on track to achieve its financial year 2019 (FY18) target of RM1.8 billion.

The sales were mainly secured from new launches in 2018 which were mainly priced below RM500,000. Meanwhile unbilled sales of RM2.5 billion will be progressively recognised over the next three years.

Currently, Mah Sing has a total land bank of 2,108 acres (853ha), with a gross development value of RM24 billion, which provides earnings visibility and will drive the company’s growth going forward.

Mah Sing’s balance sheet remained healthy with net cash per share of 12 sen as of 9MFY18. We believe the group is in a strong position to expand its land bank with a cash pile of more than RM900 million.

Mah Sing has a dividend policy of paying a minimum of 40% from its net profit since 2006.

Based on our earnings projection, we expect the company to pay dividend of 4.4 sen and 4.5 sen for FY18 and FY19, translating into yields of 4.8% and 5.1% respectively.

Its current share price offers potential upside of more than 30%, hence we maintain our “buy” recommendation on Mah Sing with an unchanged fair value of RM1.21, based on a 40% discount to its revalued net asset value.

We made no changes to our FY18-20 earnings forecasts at RM264.5 million, RM276.2 million and RM288.4 million respectively. — AmInvestment Bank, Jan 3

This article first appeared in The Edge Financial Daily, on Jan 4, 2019.

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