Mah Sing 1Q results within expectations

KUALA LUMPUR: Mah Sing Group Bhd recorded a 20.9% rise in net profit to RM84.03 million in the first quarter ended March 31 of financial year 2014 (1QFY14) from RM69.47 million a year ago, in line with market expectations. Revenue grew 51.8% to RM642.2 million from RM423.1 million in 1QFY13.

Mah Sing chalked up RM770 million in new property sales as at March 31 this year.

“The strong sales in 1QFY14 were contributed by offerings in the right locations, coupled with good township and mixed development planning, concept and designs in line with market trends,” said group managing director Tan Sri Leong Hoy Kum in a statement yesterday.

“Eighty-seven per cent of our planned residential launches for the current year are priced below RM1 million to target demand for mid-range homes from first time homebuyers and the growing middle-income households.”

In a note yesterday, RHB Research Institute Sdn Bhd said although the annualised number was below the management’s sales target of RM3.6 billion, the sales value was within the research firm’s expectation and industry trend.

“This is because 4QFY13 to 1QFY14 was a challenging period for developers after cooling measures were announced, and as such, Mah Sing also did not launch as many projects,” it said.

RHB Research has a “buy” call on the stock at RM2.25, with a higher fair value of RM2.50 from RM2.44.

In the statement, Mah Sing said strong sales were locked in from affordable high- rises such as Savanna Executive Suites at Southville City@KL South, Bangi and D’sara Sentral in Sungai Buloh, Selangor.

The group had unbilled sales of RM4.64 billion as at March 31, 2014. In addition to the group’s remaining gross development value (GDV) of RM26.08 billion, this provides a total pipeline of RM30.72 billion in GDV, giving the group earnings visibility of seven to eight years.

Revenue from property development in 1QFY14 was RM569.4 million, close to a 60% increase, compared with RM356 million in the previous corresponding period.

“The improved revenue is attributable to the higher work progress from the group’s ongoing developments,” said the group.

Mah Sing’s plastics segment continued to contribute positively to group revenue and operating profit, with revenue growing 3% to RM60.6 million as a result of higher pallet sales.

“Despite expanded operations, Mah Sing’s balance sheets remained strong with a high cash pile of RM614.2 million and low net gearing at 0.25 times as at March 31, 2014, comfortably below the management’s optimal net gearing target of 0.5 times,” said Mah Sing.

“The group is in a strong position to continue its expansion drive via landbanking exercises and development activities,” it said, adding that it intends to scout for prime land in Malaysia for further expansion.

Mah Sing expects stronger buying momentum in the second half of the year, with prospective buyers expected to buy ahead of the implementation of the goods and services tax next year.

“The fundamentals of the Malaysian property market remain solidly driven by a relatively young working population, continued urbanisation, stable employment market, attractive mortgage rates and the cultural preference for owning or investing in properties,” it said.


This article first appeared in The Edge Financial Daily, on May 30, 2014.