Mah Sing Group - Comparative analysis between Mah Sing and IJM Land BUY

- We reaffirm our BUY rating on Mah Sing Group (Mah Sing), with our fair value unchanged at RM3.60/share after assigning a 25% discount to our estimated NAV of RM4.80/share.

- Following our initiation coverage of Mah Sing, we now have two top picks for the sector, including IJM Land. While we find these two companies equally attractive, we would like to highlight a few key differentiating points between the two based on several metrics. 

- (1) Unbilled sales: Mah Sing has a clearer earningsvisibility with current unbilled sales of RM2.5bil  (1.8x FY11’s property revenue) versus IJM Land’s RM1.3bil (1.1x FY11’s property revenue)

- (2) Valuation: Mah Sing’s valuation appears more attractive on both counts, i.e. NAV and earnings multiple – 50% discount to NAV with an FY13F PE of 8x vis-a-vis IJM Land’s 41% discount to NAV and PE multiple of 15x FY13F earnings.

- (3) Management: Mah Sing is an entrepreneurial-driven property developer – under the strong management of Tan Sri Leong Hoy Kum. 

- (4) Landbanking: We view this to relate very closely to the point (3) above, whereby evidently Mah Sing has been the more aggressive in land acquisitions over the past 4 years with an RM11bil GDV replenishment. 

- Looking at this year’s figures alone, Mah Sing has already acquired three parcels of land with an estimated GDV of RM3.6bil, while IJM Land’s recent venture into London has boosted its GDV renewal to about RM3bil.

- (5) Liquidity: Mah Sing’s shares are more liquid –  with average volume traded over the past 5 years at 1.33 million shares while IJM Land has a volume traded of 1.02 million over the same period. However, IJM Land is looking  at addressing this issue with the possibility of IJM Corp paring down its current 66% stake.

- (6) GDV in the pipeline: IJM Land has in excess of RM20bil of GDV in the pipeline against Mah Sing’s RM16bil. The latter has a significant (60%) exposure in commercial – within integrated developments – and high-rise residential developments, whilst IJM Land product segmentation is more balanced between landed residential and commercial/ high-rise products.  

Source: AmeSecurities