Mah Sing (Inter-Pacific Research) outperform; target price RM2.20

Highlight

• Outperform: We maintained our Outperform recommendation with our target price at RM2.20 which is slight at a discount to our RNAV per share of RM2.23 per share. We like Mah Sing for their good track record. Mah Sing racked up sales of RM601mn in 1QFY10, achieving 60% of their full year sales target. Unbilled sales of RM1.1bn stands at about 2x their revenue recognition from the property segment in FY09, implying strong earnings visibility. We have raised our FY10 forecast by 18.9% due to (1) strong sales results by achieving 60% of the sales target in 1st quarter; (2) surge in unbilled sales of RM1.1bn; and (3) ambitious launching of RM1.02bn for FY10.

• 1QFY10 revenue swelled by 58.5% y/y to RM238.3mn: Improvement in their top line was mainly due to their property development segment that grew by 61.0% y/y and
plastic segment up 50.4%y/y. Strong performance from their property segment was came from their residential and commercial projects i.e. Southgate, Hijauan Residence, Kemuning Residence and Aman Perdana in Klang Valley, Residence@Southbay in Penang island as well as Sierra Perdana and Sri Pulai Perdana 2 in Johor Bahru.

PBT margin plunged by 10.1% q/q to 17.5%: Subsiding PBT margin was mainly due to RM8.6mn of other operating expenses incurred. Majority of the expenses was operating lease commitments for their commercial building i.e. The Icon Jalan Tun Razak. To recall, The Icon JTR was sold with a leaseback agreement as well as rental guarantee. We estimated Mah Sing’s breakeven for the commercial building will be about 95% occupancy with assumed rental rate approximately RM5psf.

Occupancy for the building is relatively low at about 9000 sq ft due to Mah Sing’s plan to secure quality tenant which occupy larger flooring. They are currently in negotiation with potentials tenants of banking, telecommunication as well as oil and gas sector.

• Sustainable sales growth momentum with multiple launching in FY10: Mah Sing’s FY10 upcoming launches include Garden Plaza (Cyberjaya), M Suites (Kuala Lumpur), One Legenda (Cheras), Icon Residence@Mont’ Kiara (Mont’ Kiara), Bayu Sekamat (Hulu Langat) and iParc 2@Shah Alam (Shah Alam) in Klang Valley. Legenda @Southbay and Southbay City (Batu Maung) in Penang, as well as more phases from existing projects including Hijauan Residence (Cheras), Aman Perdana (Meru-Shah Alam), Sri Pulai Perdana 2 and Sierra Perdana in Johor Bahru.