KUALA LUMPUR (Oct 23): Mah Sing Group Bhd is on track to achieve its 2023 property sales target of RM2.2 billion, given the strong sales momentum, continued appetite for affordable homes as well as renewed demand for properties in Johor, said CGS-CIMB Research.

In a note on Oct 20, the research firm said it maintains its “add” call on the property developer, with a higher target price (TP) of RM1.10, from 79 sen previously.

CGS-CIMB said the higher TP is based on its 10-year mean of 0.7 times financial year 2024 (FY2024) forecast price-to-book value ratio (versus five-year mean of 0.5 times previously), to capture the valuation when the Kuala Lumpur–Singapore High-Speed Rail (HSR) project was first agreed in February 2013.

It added that at its TP, Mah Sing is valued at an undemanding 11.7 times FY2024 forecast price-to-earnings ratio, adding that the stock is also supported by decent yields of 4.0%-4.6%, based on minimum payout ratio assumption of 40%.

The research firm highlighted Mah Sing’s highest return on equity of circa 6% among the property players under CGS-CIMB's coverage, compared to an industry average of 3.8%.

CGS-CIMB also raised its core net profit forecasts for Mah Sing by 5.8% for FY2024 and by 0.5% for FY2025 on higher property sales and lower net interest expense expectations.

It said Mah Sing’s share price has risen by 50% year to date, primarily fuelled by the improving sentiment, especially in the southern region, following the potential revival of the HSR, the setting up of the Singapore-Johor special economic zone as well as a spillover effect of a strong Singapore dollar against the ringgit.

"We continue to like Mah Sing for its attractive product price points, low gearing level (0.12 times as at June 30, 2023), quick turnaround of M-Series developments, and strong sales momentum," it said.

As at October 2023, Mah Sing has guided that its land bank stands at 2,333 acres with an estimated total gross development value (GDV) of RM26.8 billion. Around 70% of the remaining GDV is in the Klang Valley, followed by Johor (23%), and Penang (7%).

CGS-CIMB said potential re-rating catalysts are the timely completion of Mah Sing's ongoing projects, as two out of six planned projects were completed ahead of schedule in 2023, and continued sales momentum for its M-Series products.

M-Series developments are Mah Sing’s quick turnaround, affordable products within a mature area, which mainly cater for younger and first-time homebuyers, according to the company.

"Potential downside risks include delays in planned project completions — namely M Arisa and M Luna which are slated for completion in 2024 — and wider-than-expected losses from its glove unit due to an oversupply of gloves, which could exert pressure on selling prices," said CGS-CIMB.

At the time of writing, Mah Sing shares rose 1.5 sen or 1.94% to 79 sen, giving the developer a market capitalisation of RM1.91 billion.