Mah Sing (Macquarie Equities Research) outperform; target price RM1.95

Mah Sing Group: Exceeding expectations


We reiterate our “outperform” recommendation on Mah Sing with a raised target price of RM1.95 (previously RM1.88, ex-bonus issue). Mah Sing continues to show strong property sales and land acquisitions.


* 2010 property sales to exceed target… We expect Mah Sing to record RM1.6 billion in property sales this year, more than double its 2009 sales of RM720 million. In 1Q2010, Mah Sing has achieved sales of RM516 million, making up 52% of management’s 2010 target of RM1 billion.

* … supported by new launches. Upcoming launches include the RM84 million One Legenda Cheras bungalows, Phase 3 garden villas of Hijauan Residence Cheras, the RM284 million Southbay Legenda bungalows in Penang and the RM279 million Icon Mont’Kiara serviced residences. Mah Sing has RM5 billion worth of projects in the pipeline.

* Landbanking assumptions raised. We expect Mah Sing to continue acquiring value-enhancing landbank and therefore raise our 2010E landbanking assumption to RM1 billion from RM600 million. This follows the recent acquisition of the RM257 million M Suites @ Jalan Ampang. YTD, Mah Sing has announced RM688 million worth of projects, including the RM143 million iParc @ Shah Alam and the RM288 million Garden Plaza in Cyberjaya.

Earnings and target price revision

* We raise our 2010-11E earnings estimates by 1% and 4% as we incorporate higher property sales in 2010. We also raise our 2010E landbanking assumption from RM600 million to RM1 billion. Our target price is therefore raised to RM1.95 (from RM1.88) on a 13% discount to RNAV.

Price catalyst

* 12-month price target: RM1.95 based on a RNAV methodology.

* Catalyst: New land acquisitions, signing of JV agreement on China project.

Action and recommendation

* Mah Sing is our preferred pick in the Malaysia property space. The stock currently trades at 2010E PER of 11x, compared to S P Setia (SPSB MK, RM4.10, UP, TP: RM3.20) at 20x. Mah Sing offers an EPS CAGR of 21% in 2009–12E and ROEs of 13–18%. We like Mah Sing for management’s ability to continually enhance the development pipeline. Mah Sing’s foreign shareholding currently stands at 16%, vs the peak of 51% in 2005.

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