MAHSING (FV RM2.69 - BUY) FY11 Results Review: Still Going Strong

Mah Sing’s FY11 results were within our and consensus expectations, accounting for about 98.7% and 101% of both FY11 net profit forecasts respectively. FY11 revenue surged 41.5% y-o-y on higher progress billings from on-going projects while net profit leapt 42.8% y-o-y. For the whole year, Mah Sing’s property sales hit RM2.26bn, some 10% higher than the targeted RM2bn. We maintain our FY12 forecast and introduce our FY13 numbers. We keep our Buy call on Mah Sing, at an unchanged FV of RM2.69, based on a 20% discount to its RNAV.

Within estimates. Mah Sing’s net profit of RM168.6m for FY11 represented around 98.7% and 101% of our and consensus FY11 net profit forecasts respectively. Revenue rose 41.5% y-o-y, bolstered by higher progress billings from on-going projects in Kuala Lumpur, Klang Valley, Penang Island and Johor. Its property development division recorded a 47.5% y-o-y surge in revenue while its plastics division recorded a 10.4% yo-y increase in revenue. EBIT margin, however, contracted from 15.9% a year ago to 14.7% in FY11 due to higher marketing and administrative expenses. Despite the thinner EBIT margin, net profit still jumped 42.8% y-o-y, attributable to lower finance costs as well as lower MI charges.

Unbilled sales at a sturdy  RM2.21bn. For FY11,  Mah Sing achieved  property sales totaling RM2.26bn, beating its sales target of RM2bn. That said, the company’s unbilled sales remained strong at RM2.21bn as at the end of FY11. The company has set a sales target of at least RM2.5bn for FY12 and up to mid-Feb this year, it  had  already chalked up total sales of RM338m. Mah Sing intends to launch at least RM3bn worth of new launches for FY12,  with 70% of the launches to be priced below RM1m per unit instead of high end products, in line with the current market demand for more affordable houses. The main focus will still be the Klang Valley, where 68% of the target launches would be,  while the remaining 20% and 12% of its projects will launch in Penang and Johor respectively.

Maintain Buy. We maintain our FY12 forecast as well as introduce our FY13 estimate. Maintain BUY recommendation, at an unchanged FV of RM2.69, based on  a 20% discount to our RNAV valuation. The stock’s relatively inexpensive valuation makes it an attractive value proposition, especially for investors  seeking cheaper exposure among mid-sized property counters. Mah Sing declared a gross first and final dividend of 11sen, which translates into gross dividend yield of above 5%.

Source: OSK188