Review

• Excluding exceptional items of RM1.9mn, Mah Sing’s 9M24 core net profit rose 19% YoY to RM178.4mn, representing 80% of our full-year forecast and 75% of consensus estimates. Given that the fourth quarter is typically the strongest for the group, we consider the results to be ahead of our expectations. The outperformance was primarily driven by stronger-thananticipated development margins.

• YoY, 9M24 revenue declined 8% YoY to RM1.8bn due to lower property development revenue as more projects were in early construction stages. Despite this, core net profit rose 19% YoY to RM178.4mn, driven by 1) better property development margins from cost savings on finalised construction contracts and 2) a lower effective tax rate.

• QoQ, 3Q24 revenue and net profit increased 11% and 6%, respectively, driven by stronger property development contributions. However, manufacturing division losses widened to RM4.7mn (from RM0.1mn in 2Q24) due to forex losses. Excluding forex impacts, the segment would have posted an EBIT of RM0.4mn.

• Mah Sing 9M24 new property sales grew 2% YoY to RM1.85bn. The largest contributor was M Minori, an affordable high-rise project in Johor Bahru, accounting for 18% of total sales. The latest unbilled sales grew to RM2.8bn from RM2.4bn a quarter ago, providing the group with over twelve months of earnings visibility or 1.3x the FY23 property development revenue.

Impact

• We revise our FY24-26 earnings forecasts upward by 8–10% to reflect higher margin assumptions.

Briefing Highlights

• Having achieved 74% of its FY24 sales target in the 9M, Mah Sing appears on course to meet the RM2.5bn sales target. Moving forward, sales are expected to be further supported by new projects lined up in 4Q worth approximately RM700mn.

• Mah Sing's balance sheet remains solid, which, as of the end of Sep-24, saw a healthy net gearing ratio of 0.2x and a cash balance of RM747mn. Despite acquiring four new land parcels this year, with a total GDV of RM5.1bn, Mah Sing continues to actively seek opportunities to further expand its landbank in key areas such as Klang Valley and Johor. This strategic approach aims to expand the company's residential and industrial development portfolios.

• Management anticipates brighter prospects for its glove division, driven by increased US tariffs on Chinese-made gloves, which are expected to benefit Malaysian manufacturers. With 90% of Mah Sing's glove orders bound for the US, the division is well-positioned to capitalise on this shift. Currently, 6 out of 12 production lines, with a total annual capacity of 3.68 billion pieces, are operational. Utilisation is expected to rise to 7-9 lines by yearend. The division targets breakeven by 2Q25, contingent on average selling prices exceeding USD21 per thousand pieces, up from the current level of slightly above USD20 per thousand pieces.

• Last month, Mah Sing announced a second collaboration with Bridge Data Centres (BDC) to develop data centres at Mah Sing DC Hub@Southville City. Spanning 36 acres, the site will offer 200MW power capacity, increasing the total planned capacity to 300MW under agreements signed in May 2024. Management aims to finalise joint venture agreements and offtaker contracts by 1Q25.

Valuation

• Following the earnings revision, we raise our SOP-derived TP to RM2.41/share (previously RM2.40/share). Maintain Buy.

Source: TA Research - 2 Dec 2024