• Maintain BUY, with new MYR2.00 TP from MYR1.58, 17% upside and 3% FY24F yield. Mah Sing’s 1Q24 results were within expectations. 5M24 property sales hit MYR992m, on track to meet the MYR2.5bn target as more launches are scheduled in 2H. The maiden venture into the data centre (DC) segment with Bridge DC Malaysia V (BDC) should create a new stream of recurring income upon the completion of this DC in FY26. We raise our TP to reflect the incremental value from the investment.

• 1Q24 results. The sequential drop in property development revenue was largely attributed to a high proportion of new projects at the initial stage of construction. EBIT for the manufacturing segment improved to MYR0.65m from MYR0.41m in 4Q23, as the performance for the glove manufacturing division continued to pick up. Net gearing continued to fall to 0.06x from 0.08x in FY23. Meanwhile, 1Q24 property sales reached MYR595m vs MYR460m in 4Q23. We expect sales to pick up stronger as the company ramps up its launches in 2H.

• Joining hands with BDC. Apart from the collaboration with BDC, management also officially launched Mah Sing DC Hub @ Southville City yesterday. About 150 acres of land in Southville City has been earmarked for the DC Hub with a planned capacity of up to 500MW. BDC will be the first partner occupying 17.55 acres of land, with a planned capacity of up to 100MW. Based on a land value of MYR160 psf, total land cost for the 17.55 acres would be MYR122m. In addition to other costs to be incurred (essential infrastructure, constructions, approvals, completing all required reports etc), Mah Sing is likely to end up with at least 20% equity stake in the partnership (total capex c.MYR2-3bn). BDC will be responsible for securing artificial intelligence or AI and hyperscale DC customers, handling internal fittings and daily operations.

• A new recurring income stream from FY26. With the JV with BDC, as well as the upcoming DCs to be set up in the DC Hub, Mah Sing is ramping up its recurring income stream. Construction of BDC is expected to take about 18 months, and the maiden income to the group should start from 2H26. According to historical earnings by Chindata Group (BDC is a subsidiary), the 100MW capacity could potentially generate MYR650m in revenue pa.

• Forecasts. We raise our FY26F earnings by about 5% to reflect the new income stream coming from BDC. Unbilled sales remained steady at MYR2.32bn vs MYR2.33bn as at 4Q23.

• Higher TP. Our SOP-based TP (0% ESG premium/discount included) is now higher as we factor in the value from the investment in the DC with BDC, based on EV/EBITDA of 15x, in line with our valuation for other companies with exposure to DC. Key risk: i) Unfavourable turn in government policies on DC; and ii) political turbulence.

Source: RHB Research - 31 May 2024