MAHSING's 9MFY24 results met expectations. Its 9MFY24 revenue declined 8% YoY with ongoing projects mostly at early stages of construction. However, CNP rose 20% from higher-margin products. It is venturing further into the data centre space including possible land sale opportunities in its Meridin East township in Johor. We maintain our forecasts, OUTPERFORM rating and TP of RM2.32.

MAHSING's 9MFY24 core net profit of RM180.3m met expectations at 73% and 75% of our full-year forecast and consensus full-year estimates, respectively.

YoY, its 9MFY24 revenue declined 8% on slower progress billings as most of its on-going projects are new and at early stages of construction. However, its 9MFY24 core net profit rose 20%, thanks to a better product mix skewed towards higher-margin products.

QoQ, its 3QFY24 revenue rose 11% as property sales and construction progress picked up during the quarter. However, its core net profit remained flat due to higher operating expenses ahead of upcoming launches in 4QFY24.

Outlook. MAHSING is on track to meet its minimum sales target of RM2.5b, booking in RM1.9b of property sales as of September 2024 - usually the 4Q of the year contributes 25%-30% of full-year sales.

Meanwhile, its unbilled sales stand at RM2.8b.

For FY24, MAHSING plans to launch seven new projects totalling RM2.8b, and which to-date is at 75%, and on track to meet its target.

Of this, 61% of the total launches are in Klang Valley with 72% priced below RM500k targeting diverse market segments, particularly affordable housing and first-time house buyers.

Additionally, the group expects its portfolio to enhance long-term earnings through recurring income and value-unlocking opportunities via its data centre strategy. The group is exploring another land sale in FY24, either in the Klang Valley or near its township in Johor, and since there is no guidance on the details of the land sale, we have not factored any value at this juncture, but it is reflected in our improved realisability of GDV.

Forecast. Maintained.

Valuations. We maintain our SoP-TP of RM2.32 as we apply a 30% discount to MAHSING's RNAV (narrower than the industry average of 55%) to reflect improved realisability of its GDV.

We also have within our earnings model input a DCF-driven valuation of RM0.44/share (WACC: 4.5%, TG: 1.5%) with regards to its upcoming data centre collaboration with Bridge DC with an expected 300MW capacity, though at full capacity the hub can support up to 500MW, as guided by the group. There is no adjustment to our TP based on ESG given a 3-star rating appraised by us (see page 5).

Investment case. We like MAHSING for: (i) its focus on affordable products targeting first-time house buyers, and (ii) sound land bank management and turn-around which minimises carrying costs, (iii) a strong war chest for land acquisitions underpinned by a clean balance sheet, and (iv) more significant recurring income stream following the venture into data centre. Maintain OUTPERFORM.

Risks to our call include: (i) persistent overhang in the high-rise segment, (ii) widening losses at its glove division due to persistent oversupply, and (iii) sustained elevated inflation and mortgage rates, hurting affordability.

Source: Kenanga Research - 2 Dec 2024