Friday 17 August 2012

Mah Sing Group - Strong sets of numbers, on track for RM2.5bil sales


-  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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