Mah Sing’s long-term prospects positive

KUALA LUMPUR: Mah Sing Group Bhd’s (Mah Sing) longterm prospects have been projected by analysts to be positive and that the group’s fourth quarter of 2018 (4Q18) sales could come in stronger than this quarter, driven by affordable housing.

AmInvestment Bank Bhd (AmInvestment Bank) believed Mah Sing’s long-term prospects to be positive as the group’s strategy to focus on the affordable residential is a right move due to the persistent demand for the best products within this segment.

“The company has no problem clearing its completed units with inventory level down to RM515 million in the first nine months of financial year 2018 (9MFY18) from RM629 million in 4QFY17.

“Meanwhile, balance sheet is stable with net cash position,” the research firm said.

AmInvestment Bank highlighted that currently, Mah Sing has a total landbank of 2,108 acres, with a gross development value (GDV) of RM24 billion, which provides earnings visibility and will drive the company’s growth going forward.

“Projects in the central region that are priced under RM500,000 include M Vertica, Cheras (high-rise residential remaining GDV RM1.74 billion), M Centura, Sentul (high-rise residential - remaining GDV RM985 million) and Southville City@KL South, Bangi (mixed development - remaining GDV RM9.03 billion).

“Projects from the other regions that are also part of the group’s affordable housing strategy include Meridin East, Johor (residential township and integrated development remaining GDV RM4.6 billion) with starting price RM450,000 to RM500,000 and the M Vista, Southbay@Bayan Lepas, Penang (high-rise residential - remaining GDV RM1.5 billion) with prices starting from RM345,000.”

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), Mah Sing’s 4Q18 sales could come in stronger than this quarter since 74 per cent of the group’s target sales for the year are driven by affordable products (below RM500,000 per unit) in conjunction with its Easy Home Ownership campaigns, where buyers can enjoy stamp duty incentives immediately, and post Budget2019 clarity.

As per the group’s latest financial statements, Mah Sing’s revenue amounted to RM504.26 million for the three months ended September 30, 2018, down from RM704.26 million in the corresponding period of the previous year.

“However, buyers may also adopt a ‘wait-and-see’ approach as Budget-2019 saw the Real Estate and Housing Developers’ Association Malaysia’s (REHDA) commitment to lowering house prices by 10 per cent due to the Sales and Service Tax (SST) exemptions on building materials,” Kenanga Research opined.

Kenanga Research noted that recently, the group also announced issuance of RM145 million perpetual securities (part of the program to issue up to RM1 billion) which suggests potential landbanking activities.

The research arm further noted that Mah Sing requires landbank replenishment as all the group’s landbanks have been activated while there is also the need to replenish for the affordable housing supply demands.