Kenanga Research: Reiterates ‘buy’ for Mah Sing

Higher fair value of RM1.96
. We have revised higher our target price based on FD SoP RNAV using DCF for development profits of projects that will be launched in the next six-nine months. Recent buoyant share price was driven by the much-anticipated liquidity from recent one for five bonus issuance, approaching our previous RM1.75 fair value (RNAV of land at market value). We have changed our valuation method to DCF of development profits to reflect Mah Sing Group’s (MSGB) quick turnaround business model allowing for quicker realisation of its landbank.

1Q2010 sales of RM516 million well ahead of target sales as it accounts for 52% of FY2010E sales target of RM1 billion. [email protected] Jelutong (42 units), Perdana Residence 2 (209 units) and Garden [email protected] (402 units) were launched in early 2010; achieving take -up rates of 95%, 83% and 53%, respectively. FY2010E sales target is 38% higher than FY09’s sales of RM725 million .

Estimating GDV RM1.4 billion worth of FY2010E launches. Besides the above mentioned projects , there are seven more projects up for launch over FY2010; Legenda @ Southbay, Southbay City (commercial), Icon [email protected] Kiara, One Legenda, Garden [email protected] Residence, [email protected] and Bayu Sekamat, carrying a total GDV of RM1.8 billion. The larger projects (e.g. Southbay City) are likely to be launched in phases; hence, we estimate MSGB could launch an additional c.RM600 million over the next three quarters.

Tweaking FY2010-11 net profit up by 1%-2% to RM113 million and RM137 million, respectively. We have raised our FY2010-11E sales assumptions by 10% to RM1.1 billion-RM1.2 billion.

Reiterate BUY as there is more upside to our estimate of 19% three-eyear CAGR. We expect MSGB to raise its FY2010-11E sales targets on the back of improving sentiment and exciting product pipeline. MS GB is planning to acquire more land in the immediate term given its net cash position with RM397 million cash balance and its quick-turnaround model. Additional sweeteners include finalisation of its Changzhou, China project. At current prices, 12.8x FY2010E PER is attractive versus historical 16.4x (adjusted for bonus), while fair value implies 14.4x FY2010E PER. Dividend yield of >4% is attractive versus 2%-3% peer’s average .

We continue to like MSGB as it is consistently able to quickly turnaround the landbank that it purchased. Foreign shareholding is still low at 16% versus FY2007’s peak of c.40%.


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