CIMB Research positive on Mah Sing’s affordable homes focus

CIMB Research believes Mah Sing's Easy Home Ownership campaign could spur demand as homebuyers will enjoy the benefits of Budget 2019 immediately.

KUALA LUMPUR: CIMB Equities Research remains positive on Mah Sing Group Bhd due to its net cash position, focus on affordable housing and decent dividend yield.

The research house said on Monday that firstly, the company’s net cash position would enable it to cater to future landbank acquisition.

Secondly, it should should benefit from the increasing focus on affordable housing by the government, as the majority of the group’s products are priced below RM500,000.

Thirdly,  is the decent dividend yield of 4%-5% for FY18-20F. 

“Key risks to our Add call are a sudden deterioration in property market sentiment and weaker-than-expected property sales,” it said.

To recap, it said Mah Sing’s 9MFY18 core net profit came in below its expectations at 59% of our and 52% of Bloomberg consensus full-year forecasts.
 
The underperformance was due to weaker-than-expected recognised sales. 9M18 core net profit (excluding forex movement) dropped 39% on-year due to weaker revenue (-22% on-year), as sales secured from its new projects have limited contribution during the initial stages of construction. As of end-September 2018, unbilled sales stood at RM2.5bil.


Mah Sing’s 9M18 new property sales came in lower at RM1.22bil vs. RM1.25bil in 9M17, representing 68% of its FY18 sales target of RM1.8bil. 

“As homebuyers will likely defer their purchases to next year to enjoy the goodies from Budget 2019, we are concerned that developers might not be able to meet their targets for this year,” it said.

On Friday, Mah Sing launched its Easy Home Ownership Campaign where: (i) it will absorb memorandum of transfer (MOT) stamp duty fees for first-time buyers purchasing completed units priced RM300,001-RM1mil until end-December 2018 and (ii) it will absorb the stamp duty on MOT and loan agreements for the first RM300,000 of residential properties valued up to RM500,000 until end-Jun 2019. 

“We believe the campaign could spur demand as homebuyers will enjoy the benefits of Budget 2019 immediately.

“We cut our FY18-20F EPS by 3%-18% to reflect the changes in project timeline and development, given the weaker-than-expected revenue trend. 

“We also lower our TP to RM1.35 as we widen our RNAV discount to 35% (from 25%) to factor in the negative impact of some measures in Budget 2019: (i) Real Property Gains Tax (RPGT) rate hike and (ii) proposed 10% reduction in the prices of new houses,” it said.