Mah Sing Group Bhd
(April 13, RM1.70)
Maintain buy at RM1.74, fair value raised to RM1.96: We have revised our target price higher based on fully diluted sum-of-parts (SOP) revised net asset value (RNAV) using the discounted cash flow (DCF) method for development profits of projects that will be launched in the next six to nine months.
The buoyant share price lately was driven by the much anticipated liquidity from the recent 1-for-5 bonus issuance, approaching our previous RM1.75 fair value (RNAV of land at market value). We have changed our valuation method to DCF of development profits to reflect Mah Sing's quick turnaround business model allowing for quicker realisation of its landbank.
1Q10 sales of RM516 million were well ahead of target sales as they account for 52% of FY10E sales target of RM1 billion. iParc @ Bukit Jelutong (42 units), Perdana Residence 2 (209 units) and Garden Residence @ Cyberjaya (402 units) were launched in early 2010; achieving take-up rates of 95%, 83% and 53%, respectively. FY10E sales target is 38% higher than FY09's sales of RM725 million.
We are estimating RM1.4 billion worth of gross development value (GDV) in FY10E launches. Besides the above- mentioned projects , there are seven more projects up for launch over FY10 - Legenda @ Southbay, Southbay City (commercial), Icon Residence @ Mont'Kiara, One Legenda, Garden Villas @ Hijauan Residence, iParc @ HICOM and Bayu Sekamat - carrying a total GDV of RM1.8 billion.
The larger projects (such as Southbay City) are likely to be launched in phases, hence, we estimate Mah Sing could launch an additional RM600 million worth of projects over the next three quarters.
We are tweaking FY10 to FY11 net profit upwards by 1% to 2% to RM113 million and RM137 million, respectively. We have raised our FY10 to FY11E sales assumptions by 10% to RM1.1 billion to RM1.2 billion, respectively.
We reiterate a buy call as there is more upside to our estimate of 19% three-year compound annual growth rate (CAGR). We expect Mah Sing to raise its FY10 to FY11E sales targets on the back of improving sentiment and exciting product pipeline.
The property group is planning to acquire more land in the immediate term given its net cash position with RM397 million cash balance and its quick turnaround model. Additional sweeteners include the finalisation of its Changzhou, China project. At current prices, 12.8 times FY10E price-earnings ratio (PER) is attractive versus its historical 16.4 times (adjusted for bonus), while fair value implies 14.4 times FY10E PER. Dividend yield of more than 4% is attractive versus 2% to 3% peer's average.
We continue to like Mah Sing as it is consistently able to quickly turn around the landbank that it purchased. Foreign shareholding is still low at 16% versus FY07's peak of circa 40%. - Kenanga Research, April 13
This article appeared in The Edge Financial Daily, April 14, 2010.
(April 13, RM1.70)
Maintain buy at RM1.74, fair value raised to RM1.96: We have revised our target price higher based on fully diluted sum-of-parts (SOP) revised net asset value (RNAV) using the discounted cash flow (DCF) method for development profits of projects that will be launched in the next six to nine months.
The buoyant share price lately was driven by the much anticipated liquidity from the recent 1-for-5 bonus issuance, approaching our previous RM1.75 fair value (RNAV of land at market value). We have changed our valuation method to DCF of development profits to reflect Mah Sing's quick turnaround business model allowing for quicker realisation of its landbank.
1Q10 sales of RM516 million were well ahead of target sales as they account for 52% of FY10E sales target of RM1 billion. iParc @ Bukit Jelutong (42 units), Perdana Residence 2 (209 units) and Garden Residence @ Cyberjaya (402 units) were launched in early 2010; achieving take-up rates of 95%, 83% and 53%, respectively. FY10E sales target is 38% higher than FY09's sales of RM725 million.
We are estimating RM1.4 billion worth of gross development value (GDV) in FY10E launches. Besides the above- mentioned projects , there are seven more projects up for launch over FY10 - Legenda @ Southbay, Southbay City (commercial), Icon Residence @ Mont'Kiara, One Legenda, Garden Villas @ Hijauan Residence, iParc @ HICOM and Bayu Sekamat - carrying a total GDV of RM1.8 billion.
The larger projects (such as Southbay City) are likely to be launched in phases, hence, we estimate Mah Sing could launch an additional RM600 million worth of projects over the next three quarters.
We are tweaking FY10 to FY11 net profit upwards by 1% to 2% to RM113 million and RM137 million, respectively. We have raised our FY10 to FY11E sales assumptions by 10% to RM1.1 billion to RM1.2 billion, respectively.
We reiterate a buy call as there is more upside to our estimate of 19% three-year compound annual growth rate (CAGR). We expect Mah Sing to raise its FY10 to FY11E sales targets on the back of improving sentiment and exciting product pipeline.
The property group is planning to acquire more land in the immediate term given its net cash position with RM397 million cash balance and its quick turnaround model. Additional sweeteners include the finalisation of its Changzhou, China project. At current prices, 12.8 times FY10E price-earnings ratio (PER) is attractive versus its historical 16.4 times (adjusted for bonus), while fair value implies 14.4 times FY10E PER. Dividend yield of more than 4% is attractive versus 2% to 3% peer's average.
We continue to like Mah Sing as it is consistently able to quickly turn around the landbank that it purchased. Foreign shareholding is still low at 16% versus FY07's peak of circa 40%. - Kenanga Research, April 13
This article appeared in The Edge Financial Daily, April 14, 2010.
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