Mah Sing’s earnings and new sales on track

by **Cals** Wed 13 Nov 2013, 14:03

Business & Markets 2013

Written by RHB Research

Wednesday, 13 November 2013 10:48

Mah Sing Group Bhd
(Nov 12, RM2.18)
Maintain neutral at RM2.16 with a fair value of RM2.42: Mah Sing’s results for the third quarter ended September of 2013 financial year (3QFY13) were within our and market expectations. Overall the earnings before interest and tax (Ebit) margin for the first nine months (9M) of the year improved to 18.9% from 17.9% in 9MFY12 due to a better product mix.

Mah Sing’s new property sales amounted to RM2.3 billion, up from RM1.5 billion in the first half (1H) of FY13, on track to meet management’s RM3 billion target. Apart from the ongoing projects, the recent previews/launches of D’sara Sentral and Savanna Suites are expected to contribute to property sales in 4Q. On the first day of the VIP preview, the residential block at D’sara Sentral saw a 40% to 45% booking rate, largely due to the affordable absolute value of the units (average selling price of RM660 per square foot with built-ups of 800 to 1,100 sq ft). To be prudent, management is expected to strategically price its property products going forward, considering the weaker market sentiment in the short term.

Recently, Mah Sing signed a memorandum of purchase with SwhengTee International Sdn Bhd for the purchase of Tower B of Meridin@Medini Phase 2, which has a gross development value of RM172 million. SwhengTee, a real estate investors club, will undertake to sell the 322 units in Tower B. We understand that all the remaining units that SwhengTee is not able to sell after the first three months will only be recognised as sales by Mah Sing. The remaining two blocks in Phase 2 will be put on the market by Mah Sing before year-end.

We make no changes to our earnings forecasts. Near-term earnings are underpinned by strong unbilled sales of RM4.2 billion (RM3.9 billion in 1HFY13).

While the market may take a few quarters to digest the impact of the cooling measures, we believe the current valuations have largely priced in the impact. Nevertheless, given the lack of near-term catalysts, we maintain our “neutral” rating on Mah Sing, with an unchanged fair value of RM2.42, based on a 15% discount to realisable net asset value. — RHB Research, Nov 12

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This article first appeared in The Edge Financial Daily, on November 13, 2013.