MAH SING GROUP (MSGB MK, MAHS.KL) 4 April 2013

Buys prime land next to RRIM, opposite MRT Company report BUY

Mak Hoy Ken (Maintained) [email protected] +603 20362294 Rationale for report: Company update

Price RM2.26 Investment Highlights Fair Value RM3.03

52-week High/Low RM2.44/RM1.85 • Maintain BUY on Mah Sing with a higher fair value of Key Changes RM3.03/share (+3%), based on an unchanged 25% Fair value  discount to its NAV, as we adjust our FD share base to EPS  incorporate its rights issue (1-for-3) and warrants (3-for-5).

YE to Dec FY12 FY13F FY14F FY15F • Mah Sing has entered into an agreement with Pulangan Elit Sdn Bhd to acquire a 6.5-acre piece of land in Sg.Buloh for Revenue (RMmil) 1,775.3 2,193.7 2,657.0 2,655.1 RM85mil (RM298 psf). The said land is to be developed into Core net profit (RMmil) 230.6 290.4 352.5 417.8 Core FD EPS (sen) 27.7 21.4 26.1 30.6 a mixed-development project named D’sara Sentral: Core FD EPS growth (%) 36.8 (23.0) 22.1 17.4 Consensus net profit (RMmil) 285.8 363.0 418.5 - Phase 1: 264 units of SoVo (size from 750 sq ft) and DPS (sen) 11.1 8.0 9.8 11.9 retail-units (97) from RM650 psf onwards; Core FD PE (x) 8.1 11.2 9.3 7.8 EV/EBITDA (x) 1.0 0.7 0.1 0.5 Div yield (%) 4.9 3.6 4.3 5.2 - Phase 2: Service residences (896 units). ROE (%) 18.5 20.3 21.0 21.2 Net gearing (%) 25.5 21.2 4.4 15.4 • The estimated GDV is RM800mil over a development period of three to five years (average plot ratio: 4x). The SoVo products are set to be launched first by 1Q14. Stock and Financial Data

• We believe the project would be a sell-out, as it is Shares Outstanding (million) 1,120.8 Market Cap (RMmil) 2,532.9 strategically located diagonally opposite the upcoming Book value (RM/share) 1.50 MRT station next to the RRIM land. This is only within a P/BV (x) 1.5 5km-10km radius from matured neighbourhoods in greater ROE (%) 18.5 Sg.Buloh (e.g. Sierramas, , , TTDI, Net Gearing 25.5 ).

Major Shareholders Tan Sri Leong Hoy Kum (35.0%) • EPF (8.8%) To be sure, our checks reveal that the latest launch of Tropicana Gardens– located adjacent to another proposed Free Float (%) 33.6 MRT stop in Persiarian Surian – has been fully-taken up at Avg Daily Value (RMmil) 2.3 indicative prices of RM750 psf to RM800 psf.

Price performance 3mth 6mth 12mth • Star Avenue – another of Mah Sing’s projects launched in mid-2011 and located on the other end of the RRIM land Absolute (%) 12.1 6.5 14.4 Relative (%) 11.5 4.4 9.3 fronting Jln Sg.Buloh – has also been taken with prices for 3-storey shop offices/retail units reaching ~RM750 psf.

4.00 1,779 • More importantly, D’sara Sentral would give Mah Sing first- mover advantage over the future launches at the highly-

3.00 1,573 anticipated RRIM integrated development.

nI d • Hence, this new project would undoubtedly add to Mah e ) x M P R 2.00 1,368 o Sing’s expanding pipeline of projects, further solidifying ( ni st its targeted sales of RM3bil for this year. Other noteworthy maiden projects that are slated for launch soon include 1.00 1,162 Southville City in Bangi and Meridin@Medini.

• Mah Sing’s earnings are very much secured with strong 0.00 A O A O A O A O A O A 957 p c p c p c p c p c p unbilled sales of RM3.2bil, and backed by a healthy GDV of -r -t -r -t -r -t -r -t -r -t -r 80 80 90 90 01 01 1 1 21 21 31 RM16.6bil. As such, our revised FD NAV has been raised to RM4.03/share (FY14F earnings: +2%). Mah Sing FBM KLCI

• Mah Sing is fast-morphing into a leading entrepreneur- driven property developer in . The stock is PP 12247/06/2013 (032380) currently trading at a steep 44% discount to its revised FD NAV estimate of RM4.04/share. Mah Sing Group 4 April 2013

CHART 1 : PB BAND CHART CHART 2 : PE BAND CHART

3.0 20.0

18.0 2.6 16.0

14.0 +1s 2.2 ) )12.0 (x (x Avg 10.0 1.8 -1s 8.0

1.4 6.0

4.0

1.0 A J O J A J O J A J O J A J O J A J O J 2.0 A J O J A J O J A J O J p u a p u a p u a p u a p u a p u c a p u c a p u c a r l tc n r l tc n r l tc n r l tc n r l tc n r -l t n r -l t n r -l t n 0- 0- 0- - 0- 0- 0- - 1- 1- 1- - - 1- 1- - 1- 1- 1- - 1- 1 1- 1- 1- 1 1- 1- 1- 1 1- 1- 8 8 8 90 9 9 9 01 0 0 0 1 1 1 1 21 2 2 2 31 0 0 0 1 1 1 1 2 2 2 2 3

CHART 3: STRATEGIC LOCATION OF D’SARA SENTRAL

Source: Mah Sing, AmResearch

AmResearch Sdn Bhd 2 Mah Sing Group 4 April 2013

TABLE 1 : FINANCIAL DATA

Income Statement (RMmil, YE 31 Dec) FY11 FY12 FY13F FY14F FY15F

Revenue 1,570.7 1,775.3 2,193.7 2,657.0 2,655.1 EBITDA 244.7 323.4 405.3 491.4 567.2 Depreciation (11.4) (13.9) (17.4) (21.2) (24.5) Operating income (EBIT) 231.5 307.7 386.1 468.5 540.9 Other income & associates 0.0 0.0 0.0 0.0 0.0 Net interest (3.0) (2.2) (3.2) (4.4) 0.0 Exceptional items 3.0 4.0 5.0 6.0 6.0 Pretax profit 238.6 315.5 395.5 480.0 557.1 Taxation (70.0) (83.8) (105.0) (127.4) (139.3) Minorities/pref dividends (0.1) (1.2) (0.1) (0.1) (0.1) Net profit 168.6 230.6 290.4 352.5 417.8 Core net profit 168.6 230.6 290.4 352.5 417.8

Balance Sheet (RMmil, YE 31 Dec) FY11 FY12 FY13 FY14 FY15F

Fixed assets 85.3 101.5 134.1 162.9 188.4 Intangible assets 0.0 0.0 0.0 0.0 0.0 Other long -term assets 102.2 491.0 512.5 609.0 725.7 Total non -current assets 187.5 592.5 646.6 771.8 914.1 Cash & equivalent 665.7 589.5 838.3 1,058.3 817.9 Stock 43.8 39.7 49.0 59.3 57.2 Trade debtors 355.6 398.0 431.8 465.4 460.7 Other current assets 1,541.6 1,891.7 2,173.5 2,607.2 3,128.5 Total current assets 2,606.7 2,919.0 3,492.7 4,190.1 4,464.3 Trade creditors 736.2 1,314.4 1,125.5 1,362.8 1,313.9 Short -term borrowings 39.2 40.5 82.8 72.8 62.8 Other current liabilities 32.4 39.0 232.4 488.8 532.4 Total current liabilities 807.8 1,394.0 1,440.7 1,924.5 1,909.2 Long -term borrowings 934.8 866.2 1,058.7 1,058.7 1,058.7 Other long -term liabilities 19.3 79.9 269.3 369.3 519.3 Total long -term liabilities 954.1 946.1 1,328.0 1,428.0 1,578.0 Shareholders’ funds 1,073.2 1,244.9 1,433.5 1,680.3 1,969.6 Minority interests 15.3 10.1 15.3 15.3 16.3 BV/share (RM) 1.3 1.5 1.0 1.2 1.4

Cash Flow (RMmil, YE 31 Dec) FY11 FY12 FY13 FY14 FY15F

Pretax profit 238.6 315.5 395.5 480.0 557.1 Depreciation 11.4 13.9 17.4 21.2 24.5 Net change in working capital (218.0) 11.3 232.1 (193.5) 42.1 Others (69.4) (124.5) (248.1) 18.0 (737.8) Cash flow from operations (37.4) 216.2 396.9 325.6 (114.0) Capital expenditure (41.5) (81.6) (50.0) (50.0) (50.0) Net investments & sale of fixed assets 0.8 (61.8) 0.8 0.8 0.8 Others (7.4) 0.0 0.0 0.0 0.0 Cash flow from investing (48.1) (143.4) (49.2) (49.2) (49.2) Debt raised/(repaid) 197.3 (75.6) 50.0 50.0 50.0 Equity raised/(repaid) 290.0 13.2 0.0 0.0 0.0 Dividends paid (50.1) (76.4) (78.1) (96.4) (117.1) Others 28.0 (24.3) (25.0) (10.0) (10.0) Cash flow from financing 465.2 (163.1) (53.1) (56.4) (77.1) Net cash flow 379.7 (90.3) 294.5 220.0 (240.3) Net cash/(debt) b/f 246.5 634.2 543.8 838.3 1,058.3 Net cash/(debt) c/f 634.2 543.8 838.3 1,058.3 817.9

Key Ratios (YE 31 Dec) FY11 FY12 FY13 FY14 FY15F Revenue growth (%) 41.5 13.0 23.6 21.1 -0.1 EBITDA growth (%) 30.1 32.2 25.3 21.2 15.4 Pretax margins (%) 15.2 17.8 18.0 18.1 21.0 Net profit margins (%) 10.7 13.0 13.2 13.3 15.7 Interest cover (x) 76.2 139.7 122.5 107.3 n/a Effective tax rate (%) 29.3 26.5 26.5 26.5 25.0 Dividend payout (%) 41.0 40.0 40.0 40.0 40.0 Debtors turnover (days) 105 90 80 70 70 Stock turnover (days) 11 10 10 10 10 Creditors turnover (days) 657 580 580 580 580

Source: Mah Sing, AmResearch

AmResearch Sdn Bhd 3 Mah Sing Group 4 April 2013

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