Kenanga Research: Reiterates ‘buy’ on Mah Sing

* Expansion into Sabah reported by The Edge Property. It reinforces Mah Sing Group’s (MSGB) strategy to widen its group’s branding throughout Malaysia.Developing in Sabah for the MM2H market is right-up MSGB’s alley as it means mid- to high-end developments. Developers , including WCT Engineering and SP Setia, have on-going or new projects to tap onto palm oil/timber money and tourism. No other details of the land acquisition are provided as MSGB is still “scouting out” for prime landbank in Sabah.

* Achieved 1Q10 sales of RM516 million, as mentioned by MSGB during its EGM. A quick check indicates these are mainly booking sales arising from Perdana Residence 2 @ Selayang, Garden Residence @ Cyberjaya and iParc1 @ Bukit Jelutong which were launched earlier this year and has already achieved high bookings rates of 70%-95%; signing of SPAs for projects should be completed in the next two months. We expect >90% of these booking sales to materialise as SPA sales based on pre vious track record, as well as, additional push factor of buyers hedging against rising inflation and up-trending interests rates. If >90% of booking sales are converted to SPA sales, MSGB will be strongly on-track to meeting its RM1 billion FY10E sales target.

* Shareholders approved one for five bonus issue , during yesterday’s EGM, implying current share base could increase 20% to 832.6 million. We expect the exercise to be completed in mid April 2010 and should boost the much needed liquidity in MSGB. Upon completion, our SoP RNAV driven fair value will be diluted to RM1.75 from RM2.10 . (See below for dilutions impact table).

* Reiterate BUY given its quick-turnaround business model and aggressive landbanking. At current prices, 12x FY10E PER is attractive vs historical 14x, while fair value implies 13x FY10E PER. Dividend yield of >4.5% is attractive vs 3%-4% peer’s average. Near term catalysts lies with improved liquidity from bonus issue, finalisation of its Changzhou, China project and acquiring more strategic landbank (e.g. Bangsar land).




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