KUALA LUMPUR (Nov 21): Mah Sing Group Bhd rose as much as 3% after the property developer announced positive third quarter results with a cash call to raise RM630 million.
Mah Sing yesterday reported its net profit jumped 21.7% to RM85.9 million from RM70.6 million a year ago, on the back of higher revenue, which leapt 33% to RM713.6 million from RM536.5 million.
The group also proposed a rights issue, which would come with free warrants, and a bonus issue to reward shareholders.
At 11.11 am today, Mah Sing rose 1 sen or 0.4% to RM2.32, with 312,000 shares changing hands. It had earlier risen to a high of RM2.38.
CIMB Investment Bank Research said the third quarter results were in line with its forecasts but ahead of consensus.
Head of Research Terence Wong said the rights issue was not a surprise given Mah Sing’s aggressive land bank acquisition.
“While investors usually do not favour cash calls, we are more neutral on the corporate exercise as free warrants and a one-for-four bonus issue should act as sweeteners,” he said in a note today.
Wong estimated earnings per share to be diluted by 15% to 16% for FY15 and FY16, which may cut revised net asset value and target price (TP) by 3%.
He held an "add" rating for the stock with an unchanged TP of RM3.21.
Meanwhile, Kenanga Research said the nine-month earnings of RM255 million were within expectations, accounting for 76% and 75% of FY14E forecast by house and consensus respectively.
The research house is "neutral to positive" on the cash call, but cited preference for land bank news as well.
Kenanga’s analyst Sarah Lim said with the cash call, net gearing would ease to 0.37 times by end FY15.
She expects the group to continue expanding its land bank next year, as the lower net gearing allows Mah Sing to raise funds via borrowings.
Lim maintained an "outperform" call on the stock with an unchanged TP of RM3.05, with an ex-rights TP of RM2.48 and ex-all TP RM2.10.