Mah Sing Group Bhd
(Jan 15, 70 sen)
Maintain buy with an unchanged fair value of RM1.13: We recently met up with Mah Sing Group Bhd for an update on its plan for 2020. The company is targeting new sales of at least RM1.5 billion in the financial year ending Dec 31, 2020 (FY20) (FY19: RM1.5 billion).

It has lined up several launches for 2020 with a combined gross development value (GDV) of RM1.8 billion, 80% higher than FY19’s RM1 billion. About 75% of the launches will be in the central region of Peninsular Malaysia with affordability, strategic locations and good connectivity as their key selling points.

In the central region, Mah Sing will roll out M Luna, Kepong (high-rise residential, priced from RM385,000, GDV of RM146 million); M Adora, Wangsa Melawati, (high-rise residential, priced from RM468,000, GDV of RM208 million); the new phase of M Vertica, Cheras (high-rise residential, priced from RM480,000, GDV of RM322 million); Sensory 2 and Cerrado 2, Southville City (high-rise residential, priced from RM450,000, GDV of RM80 million); and M Centura/M Arisa, Sentul (high-rise residential, priced from RM299,000, GDV of RM322 million). All these projects are located in Kuala Lumpur.

In the northern region, the company launch Ferringhi Residence 2, Batu Ferringhi, Penang (high-rise residential, starting price of RM1 million, GDV of RM183 million). In the southern region, it will launch the Acacia, Meridin East, Johor (landed residential, priced from RM498,000, GDV of RM215 million).

To recap, Mah Sing chalked up new sales of RM1.136 billion in the cumulative nine months of FY19 (9MFY19), and is on track to achieve its FY19 target of RM1.5 billion. The sales were mainly secured from new launches in 2019, mostly priced below RM500,000.

The first phase of M Oscar in Kuchai Lama, Kuala Lumpur, comprising 200 units, achieved a 100% take-up rate at its initial launch in October 2019. Unbilled sales of RM1.7 billion will be progressively recognised over the next three years. Mah Sing has a total land bank of over 2,000 acres (809ha), with a GDV of RM24 billion, which will provide earnings visibility and drive the company’s growth going forward.

The company’s balance sheet remained healthy with net cash per share of 21 sen as of 9MFY19. We believe the group is in a strong position to expand its land bank with a cash pile of over RM1 billion.

Mah Sing is planning to redeem RM540 million (or 6.8% per annum) worth of perpetual sukuk in FY20, which will be financed via bank borrowings. We reckon the redemption of this sukuk and its conversion into a conventional loan will provide savings of about RM10 million per year.

We believe the long-term outlook for Mah Sing remains positive backed by strong sales achieved in the past few quarters. Moreover, we expect the upcoming launches to be well received given their strategic locations and attractive pricing. We maintain our “buy” recommendation as its current share price offers potential upside of more than 60%. — AmInvestment Bank, Jan 15