Bird's eye view of the Titiwangsa land which Mah Sing plans to build residential condominiums.
KUALA LUMPUR: CIMB Equities Research is retaining its Add call on Mah Sing Group at its target price of RM1.85.
“More land acquisitions would enhance its sales outlook and potentially improve investor sentiment about the stock, in our view,” the research house said on Tuesday.
CIMB Research maintained its FY17-19 EPS forecasts and target price, which is pegged to a 20% discount to realised net asset value (RNAV).
However, it cautioned that the key risk to its Add call is a sudden deterioration in property market sentiment and weaker-than-expected property sales.
To recap, Mah Sing’s 1H17 core net profit of RM162mil (excluding the accrued distribution to perpetual Sukuk holders) made up 50% of its and 49% of Bloomberg consensus full-year forecasts.
“The results were in line as we expect earnings momentum to be supported by more robust sales in 2H17,” it said.
CIMB Research said there were no major surprises in overall results, with the slight decline in 1H17 EBITDA margin to 17% (1H16: 19%) being largely expected.
It forecast earnings before interest, tax, depreciation and amoritsation (Ebitda) margin of 16% for the full-year.
Mah Sing achieved RM819mil total property sales in 1H17. This represents 46% of its unchanged total full-year target of RM1.8bil.
Major contributors to 1H17 sales were largely Klang Valley-centric developments that made up 71% of total 1H17 sales. Key initiatives driving property sales include the “RM23mil Celebration Rewards” in conjunction with the group’s 23th anniversary.
Southville City @ KL South (RM177mil) and Lakeville Residence (RM257mil) were the largest sales generators.
The group observed a sequential on-month improvement in property buying sentiment in July to August and plans to ramp up sales momentum in 2H17.
“Its unchanged RM1.8bil full-year sales target implies 20% growth in property sales in 2H17 vs. 1H17. Total planned launches in the pipeline amounts to RM1.7bil, mainly in Klang Valley, with sustained focus on the affordable and mass market segments.
“Essentially, 73% of Mah Sing’s FY17 sales target consist of properties priced at RM700,000 and below,” it said.
CIMB Research highlighted that Mah Sing turned net cash of RM704mil as at end-2Q17 (Total cash: RM1.5bil, total debt: RM805mil).
Even after setting off against the land purchases YTD worth RM496mil, the group still has ample internal cash to further fund land-banking moves in 2H17. It made four new land acquisitions totaling 41 acres in 1H17 (costing RM91 to RM387 psf).
“We expect the group to announce a few more land acquisitions before end-2017.
“We expect overall property earnings to improve in the coming quarters underpinned by unbilled sales of RM3bil as at end-2Q17, or equivalent to 1.1 times its property sales in FY16.
“For FY17F, the group has targeted the sale of residential properties priced at RM700,000 and below to make up 73% of its sales target. This is higher than the 50% share of FY16’s actual sales of RM1.8bil,” it said.
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