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Mah Sing Group Bhd
(Feb 17, RM2.04)

Maintain add rating with a higher target price (TP) of RM2.53. We fine tune our earnings per share forecasts and revalued net assets valuation (RNAV) for housekeeping reasons while keeping our TP price basis of a 10% discount to RNAV.

Mah Sing Group remains an “add” and one of our top picks, with strong earnings growth, new sales, and landbanking as potential rerating catalysts.The final results were in line with expectations, as core net profit came in 1% below our forecast and 3% above consensus estimates.

Fourth financial quarter ended Dec 31, 2014 (4QFY14) net profit increased 20% year-on-year (y-o-y), driven by the progressive recognition of profits from key projects in Petaling Jaya, Cyberjaya, Ampang and Rawang. Unbilled sales rose from RM5.06 billion in 3QFY14 to a record RM5.26 billion in 4QFY14.

Mah Sing proposed a first and final dividend of 6.5 sen (8.1 sen after adjusting for its upcoming one-for-four bonus issue) which was marginally lower than our forecast of 8.2 sen.

Mah Sing sold RM3.43 billion worth of properties in 2014, up 14% y-o-y. This came on the back of RM3.94 billion worth of launches, 74% of which were in the Klang Valley. Some RM2.51 billion or 73% of its 2014 new sales came from the Klang Valley, RM606 million or 18% from Johor, RM273 million or 8% from Sabah, and RM45 million or 1% from Penang.

The 4QFY14 new sales of RM980 million was a record high for the group and this represents an increase of 9% quarter-on-quarter and 31% y-o-y.

Recall that Mah Sing’s share price went ex for the three-for-10 rights issue (at RM1.42 per share) and the three free warrants-for-10-rights shares (exercise price of RM2.63 and expiration in 2020) on Jan 22.

The proposed one-for-four bonus issue is expected to go ex later in 3QFY15. Proceeds from the rights issue amounted to about RM630 million; RM530 million will be used for land and property development, RM92 million for working capital, and RM8 million for proposal-related expenses.

FY14 results were in line with expectations, as net profit made up 99% of our full-year forecast and 103% of consensus estimates.

The group chalked up RM3.43 billion new sales for the year, 5% shy of its target but this still represents a 14% increase y-o-y.  This is very commendable given that most of its peers suffered sales declines in 2014.

For FY15, Mah Sing is aiming for the minimum to match FY14’s new sales, which we believe is achievable as the group has several new projects lined up. — CIMB Research, Feb 17

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This article first appeared in The Edge Financial Daily, on February 18, 2015.

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