• Maintain BUY and MYR2.70 TP, 61% upside with c.3% FY24F yield. Mah Sing’s 3Q24 results are in line. It is on track to meet its MYR2.5bn sales target, as 9M24 property sales already amounted to MYR1.85bn, of which projects in Johor contributed 41%. Recent news flow on Chindata Group borrowing USD2.8bn to fund its expansion in Malaysia and the likelihood that its Malaysia campus will be used by ByteDance should help boost investors’ confidence that off-takers will be secured by the JV.

• 3Q24 results. Both the property development and manufacturing segments drove the QoQ revenue growth. While the performance of its glove business remained stable, LBIT for the manufacturing segment widened (-MYR3.68m in 3Q24 vs -MYR1.16m in 2Q24), as the plastics division was affected by a FX loss resulting from the strengthening of the MYR against the USD during the quarter. Net gearing rose to 0.22x from 0.1x in 2Q24, due to new borrowings undertaken to fund acquisitions of new land (payment for M Legasi land). Management guided that its net gearing going forward will be capped below 0.3x, as free cash flow of about MYR500m from completed projects will also help to fund new landbank acquisitions in future.

• Sales remained stable in 3Q24. 3Q24 property sales reached MYR605m, vs MYR650m in 2Q24. 9M24 new sales amounted to MYR1.85bn, ie on track to meet management’s MYR2.5bn target by the year-end. Key projects that contributed to its 9M24 sales include M Minori in Johor (MYR337m), M Zenya (MYR281m), Meridin East (MYR337m) and M Nova (MYR134m) and the recently launched M Tiara (MYR104m). Collectively, the Johor region contributed MYR753m in sales or 41% of total 9M24 sales compared to only 21% in the same period last year.

• Other updates. Management is still in discussions with its partner Bridge Data Centre, and the JV agreement should be finalised by May next year. Both parties will also lock in the off-takers at the same time. As for the glove division, sales orders are expected to improve further going into 2025 as the 50% tariff imposed by the US on China imports should benefit Mah Sing, since it exports 93% of its products to the US. Management expects the division to turn profitable by mid-2025.

• We maintain our earnings forecasts. Unbilled sales increased to MYR2.77bn in 3Q24, vs MYR2.43bn as at 2Q24. Note: Our FY25F earnings included the potential gain on disposal of 53 acres of land in Southville DC Hub to the JV.

• Maintain TP. Our SOP-based TP is based on a 30% discount to RNAV for the property segment, and 15x EV/EBITDA for the investment in DC with Bridge as well as 8x P/E for the plastics arm.

Source: RHB Securities Research - 2 Dec 2024