- We maintain our BUY
recommendation on Mah Sing Group (Mah Sing), with our fair value kept unchanged
at RM3.60/share.
- Mah Sing reported
1HFY12 earnings of RM120mil, a strong YoY growth of 42% – after posting a net
income of RM61mil in 2QFY12 although this was flat QoQ due to slightly weaker
margin of 17.6% vs. 18.2% previously.
- However, this was
not related to development margins or product mix, but rather due to higher
staff costs for the benefit of tax relief.
As expected, no interim dividend was declared.
- Mah Sing’s numbers
outperformed our and consensus’ estimates by 7% and 5%, respectively, due to
strongerthan-expected property margin achieved at 20% versus our estimate of
18.5%, and partly because of a lower tax rate. Key contributors to earnings
included Kinrara Residence, Garden Residence and Sierra Perdana.
- We are therefore
tweaking up our forecasts for FY12F, FY13F and FY14F by 2%-5% to RM219mil,
RM268mil and RM326mil, respectively, as we raise our margins to 19%-20% and
lower our assumption for tax rate this year.
- Our new forecast
would also be supported by its healthy unbilled sales of RM2.69bil, which is 2x
FY11’s property revenue. This is on the back of strong new sales of RM1.29bil
as at end-1HFY12 and Mah Sing is very much on track to achieve its new sales
target of RM2.5bil this year.
- The five key
projects, i.e. Kinrara Residence, M City, Icon City, Garden and M Residence
account for some 75% of the RM1.29bil sales achieved.
- Going forward, we
believe the soon to-be-launched Southville City would be the key driver to its
sales. Response has been robust, whereby we understand the development has seen
1,400 registrants to-date.
- This development
would again be a testament to Mah Sing’s slick execution. With a direct frontage
to the NorthSouth Expressway, the development is earmarked to be the commercial
hub of the southern corridor Klang Valley.
- Mah Sing remains
undervalued on asset and earnings standpoints, trading at a steep 51% discount
to its estimated NAV of RM4.80/share and a cheap 7x FY13F earnings. We expect
valuation to gap up though, to be driven by sustained earnings delivery with a
generous dividend policy, astute landbanking to drive NAV growth and a belated
appreciation of its strong management team under entrepreneur developer Tan Sri
Leong
Source: AmeSecurities
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