AmInvestment keeps 'buy' call on Mah Sing, positive on long-term outlook

KUALA LUMPUR (Jan 15): AmInvestment Bank Research has maintained its 'buy' rating on Mah Sing Group Bhd at 70 sen, with an unchanged fair value of RM1.13, offering a potential gain of 60%.

In a note today, the research house said its rating is supported by a sum-of-parts valuation which detailed a 45% discount to Mah Sing's revalued net asset value.

AmInvestment analyst Thong Pak Leng maintained Mah Sing's net profit forecasts for FY19-21 of RM229.6 million, RM258.9 million and RM279.5 million respectively.

Thong said Mah Sing accrued new sales of RM1.136 billion in 9MFY19, and is on path to capture its FY19 target of RM1.5 billion. Meanwhile, unbilled sales of RM1.7 billion will be progressively realised over the next three years.

The analyst said long-term prospects for Mah Sing appear optimistic, riding on the back of targeted new sales of at least RM1.5 billion in FY20. In the pipeline are several launches for 2020 with a combined gross development value (GDV) of RM1.8 billion, which is 80% higher than FY19's RM1 billion.

The company's total landbank stands at more than 2,000 acres, with a GDV of RM24 billion, which will provide earnings visibility and propel the company's growth going forward.

"Mah Sing's balance sheet remains robust with net cash of 21 sen per share as of 9MFY19. We believe the group is in a strong position to expand its landbank with a cash stock exceeding RM1 billion," said Thong.

The company is also planning to redeem RM540 million (at 6.8% per annum) worth of perpetual sukuk in FY20 which will be financed via bank borrowings. Thong reckons that the redemption of this perpetual sukuk and its conversion into conventional loan will provide savings of about RM10 million annually.

"We expect the upcoming launches to be well received given their strategic locations and attractive pricing," he added.

As at 10:35am, Mah Sing shares were traded at 71 sen, for a market capitalisation of RM1.7 billion.