Thursday 28 Mar 2024
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Mah Sing Group Bhd
(April 1, RM2.03)

Maintain buy with an unchanged target price of RM3: Mah Sing has completed the issuance of an unrated perpetual sukuk musyarakah with a nominal value of RM540 million via a private placement. The issue — with a distribution rate of 6.8% — has no fixed maturity date, but is callable after five years.

Mah Sing’s move is timely as it enables the group to lock in unsecured long-term funding while strengthening its capital structure. Also, the move reflects its growing stature with investors, with improved future fundraising options, whenever required.

As the perpetual sukuk has equity-like features, our preliminary estimates point to an improvement in Mah Sing’s forecast financial year 2015 (FY15F) net gearing to 9% from 25% currently. On the flipside, we estimate a small 2% to 4% contraction in FY15F to FY16F fully-diluted earnings per share (EPS) — assuming the entire proceeds are reinvested in fixed deposits for the time being. We maintain our earnings forecast for now pending more clarity on how Mah Sing will utilise the proceeds. We believe the monies will be quickly put to work on any value- or EPS-accretive moves.

Mah Sing remains on track to achieve its new sales target of RM3.4 billion for FY15F amid a more challenging market environment.

Our conviction is underpinned by the group’s focus on residential launches targeted at the mass market. To be sure, around 44% of its products are priced below RM500,000 (below RM1 million: 84%).

The group managed to secure a 67% take-up rate for the sixth tower block of its Savanna Executive Suites, Southville City@KL South, which was launched last December. The seventh block was open for viewing about a fortnight ago. The first five blocks have already been sold out. We continue to rate Mah Sing as our top large cap property pick. — AmResearch, April 1

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This article first appeared in The Edge Financial Daily, on April 2, 2015.

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