Mah Sing Group Bhd (Feb 24, RM1.82)
Maintain buy at RM1.83, fair value raised to RM2.38: Mah Sing’s results were above expectations. The revenue for the quarters reached 112.2% of full-year forecasts while net profit was 104.4% of forecast.
Mah Sing once again registered year-on-year (y-o-y) growth for both its top line and bottom line.
Top-line revenue increased substantially both y-o-y and quarter-on-quarter (q-o-q). This resulted in a substantial increase in profit before tax (PBT). Net profit increase was less as a result of high taxation. Nevertheless its net profit increased 46.9% y-o-y and 6.7% q-o-q.
The group’s sales for the quarter has been strong and substantially boosted by the Southgate corporate building en bloc sales and the handover of The Icon, Jalan Tun Razak.
Mah Sing has replenished its landbank and acquired 19 acres (7.69ha) of prime land in the Hicom Industrial Estate at Shah Alam. The acquisition was for RM45.5 million or RM54.45 psf.
The land will be used for industrial development to be named iParc2 @Shah Alam. The estimated gross development value (GDV) is RM143 million.
With regards to the prime freehold land in Cyberjaya, Mah Sing had also exercised it rights to acquire a 6.32-acre plot in Dengkil, Sepang, which is adjacent to commercial land, for RM21.7 million or RM79 psf.
The group has proposed a first and final dividend of 13% or 6.5 sen per ordinary share in respect of FYE Dec 31, 2009. The group has also submitted a listing application for the proposed bonus issue of shares. This is on the basis of one new share for every five existing shares of 50 sen each.
The prospects for the group remain strong. The group has a large exposure to Cyberjaya in which demand has recently surged. The large landbank would enable Mah Sing to realise further earnings visibility in future.
We believe the Shah Alam acquisition holds similarly strong potential. The area is very well connected through several highways and would be a very attractive hub for large companies and transportation firms.
We maintain our buy call on Mah Sing. Our current fair value is higher at RM2.38 based on a price-to-earnings ratio (PER) of 14 times and 2010F’s earnings per share (EPS) of 17 sen.
We raise our PER amid a higher average industry PER. Our premium to the industry average is attributable to Mah Sing’s strong track record, high transparency, strong cash positions and strong earnings visibility. — SJ Securities, Feb 24
This article appeared in The Edge Financial Daily, Feb 25, 2010.
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