mah sing berhad : quick turnaround model to add more value - 14/10/2010

8/8/2019 Mah Sing Berhad : Quick Turnaround Model To Add More Value - 14/10/2010

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Issued Capital (m shares) 831.6

Market Cap (RMm) 1,580.0

Daily Trading Vol (m shs) 0.4

52wk Price Range (RM) 1.40-2.00

Major Shareholders: (% )

Tan Sri Leong Hoy Kum 34.2

PNB 25.0

Koperasi Permodalan Felda 7.7

FYE Dec FY10 FY11 FY12

EPS chg (%) - - -

Var to Cons (%) (4.6) (4.9) (4.9)

PE Band Chart

Relative Performance To FBM KLCI

Loong Kok W en, CFA(603) 92802237

[email protected]

Table 1 : Investment Statistics (MAHSING; Code: 8583) Bloomberg: MSGB MK

Net Net

FY E Turnover profit EPS Growth P ER C.EPS* P/ CF P/ NTA ROE Gearing GDY

Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)

2009 699.2 94.3 11.3 (8.5) 16.8 - 9.0 1.9 12.3 Net Cash 2.1

2010f 1,049.1 116.6 14.0 23.6 13.6 14.7 (58.4) 1.7 13.2 Net Cash 3.0

2011f 1,171.5 143.1 17.2 22.8 11.0 18.1 21.4 1.6 14.9 Net Cash 3.6

2012f 1,389.8 176.3 21.2 23.2 9.0 22.3 22.3 1.4 16.7 Net Cash 4.5

Main Market Listing /Trustee Stock/Syariah Approved Stock By The SC * Consensus Based On IBES Estimates

♦ Projects strategically located. Mah Sing has three projects which are

strategically positioned to benefit from the Government’s MRT network

development. These are Star Avenue (Sg Buloh station), Icon Mont’ Kiara

(Matrade station) and M Suites (Great Eastern mall station). Apart from Star

Avenue, which has not been launched, Icon Mont’ Kiara and M Suites projects

are well-received thus far, with a take-up rate of 70% for Block 1 and 30%

for Block 2 of Icon MK, and 75% for M Suites.

♦ Buying more landbank soon. Mah Sing is aggressive in its landbanking

activities, which will typically enhance RNAV due to higher contribution to

projects’ DCF. Apart from the more than 100-acre piece of land that it is

currently eyeing, designated for township development, it is also hunting for

other land parcels, mainly concentrate in the Klang Valley area. We believe

Mah Sing is likely to seal at least one deal by the end of this year. In addition,

Mah Sing has also proposed the issuance of RM325m convertible bond last

month. Hence, funding will be ready for the company to source for landbank.

♦ Record high sales. Mah Sing exceeded its 2010 initial sales target of RM1bn

within 7 months. Given the new launches in 3Q – Kinrara Residence, Icon MK,

M-Suites and One Lagenda, we are confident that Mah Sing is on track to

meet its revised sales target of > RM1.5bn this year. This is at its record high

since 2005, and we believe sales momentum will continue going into 2011.

♦ Risks and concerns. The risks include: 1) cap on loan-to-value ratio

imposed by Bank Negara Malaysia; 2) higher tax bracket for real property

gain tax (RPGT); 3) delays in launches and approvals; and 4) country risks.

♦ Earnings outlook. No change in our earnings forecasts.

♦ Quick turnaround model deserves a premium. Mah Sing’s shares

performed as expected, and we still see values given Mah Sing’s aggressive

landbanking effort and strong property sales. The property sector as a wholewill also continue to benefit under the Government’s ETP. The company’s

quick turnaround model has worked well thus far. It has successfully

generated record high sales, but yet valuations are not at its record high –

current FY11 P/B 1.58x vs 1.87x +2 stdev P/B. We believe a premium over its

RNAV is justifiable now, as landbank value is being realised faster, compared

to the average turnaround time of other developers. As such, we impute a

10% premium on our RNAV/share estimate of RM2.11 to derive our indicative

fair value of RM2.33 (upped from RM2.06). The stock remains one of our top

picks for the sector and we reiterate our Outperform rating on the stock.

Corporate High l ig hts

Company Upda te

Mah SingQuick Turnaround Model To Add More Value M

a l a s i a RHB Research

Institute Sdn BhdA member of theRHB Banking GroupCompany No: 233327 -M

14 October 2010

Please read important disclosures at the end of this report.

M

A R K E T

D A T E L I N E

P P

7 7 6 7 / 0 9 / 2 0 1 1 ( 0 2 8 7 3 0 )

Share Price : RM1.90Fair Value : RM2.33Recom : Outperform

(Maintained)

Mah Sing

FBM KLCI

PER = 14x

PER = 12x

PER = 10x



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Table 2: RNAV breakdown

Projects Remaining Remaining Equity NPV @ 8.3%

size (acres) GDV (RM mil) interest (RM mil)

Launched

Klang Valley

Residential

- StarParc Point Setapak - 5 100% -

- Hijauan Residence, Cheras 25 233 100% 31.5

- Kemuning Residence, Shah Alam - 13 100% -

- Aman Perdana, Meru-Shah Alam 63 126 100% 14.4

- Garden Residence, Cyberjaya 60 531 100% 65.3

- Perdana Residence 2, Selayang 7 32 100% 32.0

Commercial

- Southgate Commercial Centre, KL - 12 100% -

- iParc Bkt Jelutong - 3 100% -

Penang

Residential

- Residence @ Southbay, Penang 3 22 70% 2.3

Johor

Residential

- Sri Pulai Perdana, Skudai 53 60 100% 60.0

- Sri Pulai Perdana 2, Skudai 68 192 100% 15.3- Austin Perdana, Tebrau 33 68 100% 6.7

- Sierra Perdana, Tebrau-Plentong 180 467 100% 37.2

Not Launched

Klang Valley

Residential

- The Icon Residence, Mont' Kiara 3 298 100% 38.2

- One Legenda, Cheras 10 92 100% 15.6

- Bayu Sekamat, Hulu Langat, Cheras 6 22 100% 2.3

- Garden Plaza, Cyberjaya 6 288 100% 33.2

- M Suites @ Jalan Ampang 1 257 100% 34.8

- Kinrara JV 13.2 100 100% 14.8

- Kinrara Residence 125.8 730 100% 85.4

Commercial

- Icon City, Petaling Jaya 20 838 100% 87.2

- Star Avenue 18 280 100% 27.9

Industrial

- i-Parc 2 @ Shah Alam 19 167 100% 21.3

- i-Parc 3 @ Bukit Jelutong 11 82 100% 9.5

Penang

Residential

- Legenda @ Southbay 1213 335 70% 36.4

- Icon Residence, Georgetown Penang 3 280 70% 27.1

Commercial

- Southbay City 33 911 70% 74.8

Overseas

China Changzhou Project 87.3 256 51% 10.1

Total 2,061 6,700 783.2

Unbilled sales 129.9Total 913.0

Shareholders' fund 845.7

Total RNAV 1,758.7

Shares base (mil) 831.6

RNAV per share (RM) 2.11

Discount 10%

Fair value per share 2.33



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IMP ORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. Theopinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ orbe contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to beconstrued as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in anymanner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated personsmay from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectivesof persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluateparticular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment orstrategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents acceptsany liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providinginvestment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHBGroup may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity

securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or otherservices from the companies in which the securities have been d iscussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflectinformation known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation basedupon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Chart 3: Mahsing Technical View Point

♦ The share price of Mahsing has been trading along

an uptrend line (UTL) since Jul 2008.

♦ When it surpassed the RM1.44 level in May 2009,

the stock began a major rangebound trading from

RM1.44 to RM1.64 in most of the periods until a

convincing removal of the resistance level at

RM1.64 in Jun 2010.

♦ Thereafter, the stock headed for a retest of RM1.80

in Jul, and following rounds of volatile sessions, it

finally conquered the RM1.80 level in late Sep

2010.

♦ The stock hit the RM1.95 higher level recently and

triggered a series of profit-taking activities. It

closed yesterday at RM1.90, just above the 10-day

SMA of RM1.89.

♦ Closed with a small “hammer” candle with a

rebound from below the 10-day SMA, the stock

may continue to test out the RM1.95 hurdle in the

near term.

♦ Although the momentum readings are heading

downward, we are confident that it will remain

positive at above the RM1.80 level. Otherwise, its

upward momentum will diminish and it will threaten

the long-term UTL support near RM1.64.

♦ For now, we stay optimistic and foresee a

resumption of its upswing, before marching

towards the RM2.11 all-time high level soon.



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Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or moreover a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take onhigher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommendedsecurities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for theactions of third parties in this respect.

mah sing berhad : quick turnaround model to add more value - 14/10/2010

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