We maintain our BUY rating on Mah Sing and raise our target price from RM1.80 to RM2.10 based a mid-cycle discount of 25% to our NAV of RM2.81
The Key Highlights in the report are:
The Group recently acquired two development sites in Sentul and Titiwangsa, with end products targeting the affordable housing market. Mah Sing solidified its market presence in this segment when its latest land deal: an 11.2- acre site strategically located along Jalan Cheras, acquired for a total consideration of up to RM263m or (RM53.9psf).
Mah Sing’s recent land deals are all located in the Greater KL with end products targeting the affordable housing segment where there are numerous incentives for first time home buyers. The group now has a sustainable portfolio of products, as more than 50% of future presales would be priced competitively below RM500,000/unit.
Mah Sing will preview M-Vertica in 3Q17, with maiden launch of service apartments targeted for 4Q17. We expect M-Vertica to be as successful as its Southville City development given its strategic location surrounded by mature neighbourhoods in the inner city, excellent transport connectivity and market clearing pricing strategy. M-Vertica should supplant the earning contributions from Southville City to anchor earnings growth, we believe.
We forecast Mah Sing to grow its earnings by a modest CAGR of 4-5% (FY11- FY16: 16%), from an estimated RM398m in FY17F to RM416m in FY18GF. Based on a sustainable dividend payout of 40%, dividend per share is estimated to be about 6.5-7 sen, over FY17F-FY18F. Based in its last traded share price of RM1.59, this translates to attractive dividend yield of 4.5%.
