KUALA LUMPUR (March 8): Property developer Mah Sing Group Bhd’s earnings may be stronger than market expectations in the financial year ending Dec 31, 2024 on the back of strong sales, according to CGS International Securities.
Mah Sing’s core earnings may grow 14% in FY2024 to 10 sen per share, a tad above consensus estimates, CGS said in a note to clients. The research house raised its FY2024-FY2025 core net profit forecasts from 6.9% to 12.2% on higher progress billings and easing labour crunch.
The company is aiming to sell at least RM2.5 billion worth of properties this year, a target which CGS said is “achievable” given the affordability of its entry-level M-series homes. In FY2023, the M-Series achieved a take-up rate of 90%-100%, and “we expect the encouraging momentum to sustain” in FY2024, CGS said.
CGS raised its target price for Mah Sing to RM1.16 from RM1.10, and maintained the stock on “add”, equivalent to a “buy” call. All 13 analysts covering Mah Sing have “buy” ratings with a median 12-month target price of RM1.19, according to Bloomberg.
Shares of Mah Sing have surged 23% so far this year, sharply outperforming the sector and the broader market. Bursa Malaysia Property Index, which tracks 97 real estate developers, has risen 6.3% year to date while the country’s benchmark index FBM KLCI has climbed 5.7%.
The stock is supported by “decent” FY2024-FY2026 dividend yields of 4.1%-4.6% while offering highest return on equity of around 6.5% among property developers under coverage and above industry average of 4.5%, due to fast turnaround of its land bank, CGS noted.
Expansions in Mah Sing’s landbank to date have been at “attractive” valuations with costs at 8%-17% of gross development value (GDV), below the industry’s normal 20% ratio, CGS said. Despite a slew of land acquisitions, net gearing was at a record-low of 0.08x at the end-FY2023, indicating strong cash flow, it said.
Nevertheless, CGS cautioned of downside risks including delays in planned project completions and wider-than-expected losses from its glove unit due to oversupply. Mah Sing’s manufacturing unit is expected to record RM5 million in operating loss in FY2024, similar to FY2023, CGS added.
For the financial year ended Dec 31, 2023, the group registered a net profit of RM215.29 million, up 19.6% from RM180.05 million a year earlier. Its revenue also climbed 12.3% to RM2.60 billion from RM2.32 billion.
At Friday’s noon break, Mah Sing’s share price was up two sen or 2% at RM1.02, valuing the group at RM2.46 billion.