Nomura upgrades Mah Sing to ‘buy’, hikes target price

PETALING JAYA: Nomura Research has upgraded property developer Mah Sing Group Bhd to a “buy” call with an increased target price of RM1.81, reflecting a 16.8% upside from RM1.60.

In a research report, Nomura Research said it believes Mah Sing’s financial year 2018 (FY18) pre-sales performance could surprise on the upside, as compared to the management’s FY17 target of RM1.8bil.

“Considering the improved household income data, the price points of Mah Sing’s major projects and the expectation of positive pre-sales performances from upcoming new launches, which have a total gross development value (GDV) of RM3.7bil.

“Despite falling transaction volumes for the overall market, we raise our FY18 presales estimate to MYR2.0bil from MYR1.8bil,” it said. While the overall market has reported higher overhang units and values, Mah Sing’s inventory value has fallen by 10.7% since the start of the year.

The management has explained that the fall was mainly due to the sales of completed units. Declining inventory levels is positive and should further improve Mah Sing’s cash flow position.

Nomura Research estimates that the company can still keep net gearing below 0.25 times even after acquiring another RM1.2bil of land bank.

“We raise our FY18 and FY19 profit after tax and minority interests (Patmi) by 18% and 13% to reflect our expectation of better pre-sales performance.

“We raise our revalued net asset valuation per share (RNAV/share) estimate to RM2.40, from MYR2.35, to reflect the recent land purchases and apply a lower RNAV discount of 22.5%, from 30%, to derive our target price, as we believe Mah Sing is well positioned to benefit from the higher household income data,” added Nomura Research.