COMPANY U PDAT E Friday, March 29, 2019 FBMKLCI: 1, 641.33 Sector: Property

THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Mah Sing Group Bhd TP: RM1.07 (+13.8%) Last Traded: RM0.94 First Land Acquisition in 2019 Buy

Thiam Chiann Wen Tel: +603-2167 9615 [email protected] www.taonline.com.my

Acquiring 4.6 acres of freehold land in for RM90.3mn Share Information Mah Sing announced that it had entered into a sale and purchase agreement with Bloomberg Code MSGB MK Stock Code 8583 TC Goldyear Sdn Bhd (vendor) for the proposed acquisition of 6 pieces of Listing Main Market adjoining freehold land in Mukim Petaling, Kuala Lumpur, measuring Share Cap (mn) 2,427.7 Market Cap (RMmn) 2,269.9 approximately 4.63 acres for RM90.3mn (or RM448psf). Note that the purchase 52-wk Hi/Lo (RM) 1.32/0.89 consideration is inclusive of development charge and improvement service fund. 12-mth Avg Daily Vol ('000 shrs) 1,422.0 Estimated Free Float (%) 32.9 Beta 1 Prime Land in Old Klang Road Major Shareholders (%) According to announcement, the land is approximately 10 km away from Kuala Tan Sri Dato' Sri Leong Hoy Kum - 35.0 PNB - 16.3 Lumpur City Centre and strategically situated at the centre of established EPF - 9.3 neighbourhoods of Old Klang Road, , and Salak South which Lembaga Tabung Haji - 5.8 have ready amenities, facilities and infrastructure – see Appendix 1 & 2 . The land is also easily accessible via major highways and trunk roads. Access to the Forecast Revision FY19 FY20 NPE and Silk Highways is just 1.1km away, KESAS and KL Seremban Highways Forecast Revision (%) 0.0 0.0 within 2.8km and MEX and Smart Tunnel within 4.8km. Net profit (RMmn) 212.0 216.8 Consensus 238.3 247.1 TA's / Consensus (%) 89.0 87.7 In terms of public transportation, the land is only 800m to the upcoming Taman Previous Rating Hold (Upgraded) Naga Emas MRT station along MRT Line 2 (Sungai Buloh-Serdang-Putrajaya Line) Financial Indicators which is targeted for completion by July 2021 and fully operational by 2022. We FY19 FY20 understand that Taman Naga Emas station, which is two MRT stops away to Net gearing (x) net cash net cash and five MRT stops away to , would enjoy CFPS (sen) 27.2 9.8 P/CFPS (x) 3.4 9.5 Park and Ride facilities. ROE (%) 6.0 5.9 ROA (%) 3.0 2.9 NTA/Share (RM) 1.5 1.5 High-rise development worth RM500mn GDV Price/ NTA (x) 0.6 0.6 Based on the preliminary plan, the residential development, which is planned to be affordably priced, will offer serviced apartments units with indicative built up Share Performance (%) Price Change MSGB FBM KLCI from 700 sq. ft. comprising two to four bedrooms, priced from RM428k/unit. 1 mth (6.5) (3.9) Spanning over a development period of 4-5 years, the development is expected 3 mth 1.6 (3.0) 6 mth (8.3) (8.5) to yield a GDV of RM500mn. Management expects to launch a preview of this 12 mth (7.4) (11.6) project in 2H19. (12-Mth) Share Price relative to the FBMKLCI Positive on the land acquisition for future growth We are positive on the deal as it is in line with the group’s focus to acquire prime land in strategic location especially in the Klang Valley. The latest acquisition will increase the group’s landbank to 2,109.2 acres with total remaining GDV and unbilled sales of RM26.2bn. Based on the estimated GDV of RM500mn, the land cost (includes development charges) makes up 16% of the total development value. As the land cost to GDV ratio comes below the general rule of thumb of 20%, we deem the acquisition price reasonable.

Source: Bloomberg We expect this development to replicate the group’s existing projects such as M Vertica in Cheras and M Centura in Sentul, which have been well-received by the first time home buyers, working professionals, young families and home upgraders seeking to live close to the city centre. At an indicative selling price of RM611psf onwards, we believe the project is competitively priced. According

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to media reports , new non -landed residential launches within Old Klang Road vicinity can fetch around RM800 to RM900 psf for those located close to the Federal Highway or , and RM550 to RM700 psf for those located in the southern portion closer to Jalan Puchong.

In terms of funding, we believe Mah Sing’s strong balance sheet with cash balance of RM1.2bn as at Dec-18, should provide financial flexibility for this land acquisition and future landbanking.

Impact No change to our FY19-21 earnings forecasts pending the completion of the land deal.

Valuation Rolling forward our valuation base year to CY20, we arrive at new target price of RM1.07/share (previous RM1.04/share). Our target price is based on target average blended CY20 PE/PB of 10x/0.8x. With a total upside of 14%, we upgrade Mah Sing to Buy from Hold previously.

Appendix 1: Location Map

Source: Mah Sing

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Appendix 2: KL City View from the Land

Source: Mah Sing

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Earnings Summary Profit and Los s (RM'mn) Balance S heet RM'mn) FYE Dec 2017 2018 2019F 2020F 2021F FYE Dec 2017 2018 2019F 2020F 2021F Revenue 2915.8 2192.9 2290.3 2381.7 2388.3 PPE 155.9 227.4 217.6 208.7 200.6 COGS (2154.1) (1542.4) (1603.2) (1667.2) (1671.8) Land held for dev 1482.2 1619.8 1635.4 1643.4 1651.5 Gross profit 761.7 650.6 687.1 714.5 716.5 Leasehold land 5.6 4.8 4.8 4.8 4.7 Investment Properties 227.8 228.5 228.5 228.5 228.5 EBITDA 493.0 392.0 420.9 430.2 429.7 Others 148.7 174.1 174.1 174.1 174.1 Deprecia tion (16.4) (13.5) (19.7) (18.9) (18.1) LT Assets 2020.2 2254.6 2260.4 2259.5 2259.5 Amortisa tion (0.0) (0.0) (0.0) (0.0) (0.0) EBIT 476.5 378.4 401.1 411.3 411.5 Property dev. Cost 2139.5 1749.2 1821.8 1901.4 1988.8 Finance cost (4.3) (10.1) (4.6) (5.1) (5.7) Inventories 629.0 731.3 131.8 137.0 137.4 PBT 472.3 347.6 396.6 406.2 405.9 Trade & other receivables 1121.7 946.0 784.4 815.7 817.9 Cash & Cash equivalent 1216.2 1220.5 2155.8 2672.2 3223.1 Ta x (113.1) (77.0) (95.2) (97.5) (97.4) Others 13.5 7.9 7.9 7.9 7.9 MI 2.7 1.0 (7.9) (10.5) 0.0 ST Assets 5120.0 4654.8 4901.7 5534.2 6175.2 Net profit 302.8 190.1 212.0 216.8 227.0 Normalised Net profit 302.8 190.1 212.0 216.8 227.0 Total Assets 7140.2 6909.4 7162.1 7793.8 8434.7

EPS (sen) 12.6 7.9 8.8 9.0 9.4 Trade and other payables 1524.3 1395.8 1066.7 1109.3 1112.4 DPS (sen) 6.5 4.5 5.0 5.0 5.0 ST Borrowings 143.4 121.3 121.3 121.3 121.3 Others 37.7 22.4 22.4 22.4 22.4 ST Liabilities 1705.4 1539.6 1210.5 1253.1 1256.1 Cash Flows (RM'mn) 2017 2018 2019F 2020F 2021F PBT 472.3 347.6 396.6 406.2 405.9 LT Borrowings 638.0 443.0 813.8 1184.5 1604.2 Depr & Amort 16.5 13.6 19.8 18.9 18.1 Others 149.1 103.1 103.1 103.1 103.1 Ta x (113.1) (77.0) (95.2) (97.5) (97.4) LT Liabilities 787.2 546.1 916.9 1287.7 1707.4 Others (9.8) 353.1 359.4 (73.6) (87.0) CFO 365.8 637.2 680.5 254.0 239.6 Share Cap 1773.3 1776.1 1776.1 1776.1 1776.1 Reserves 1682.7 1712.9 1834.6 1961.0 2097.6 Ca pex (266.6) (287.1) (25.6) (18.1) (18.1) Shareholder's Funds 3456.0 3489.0 3610.6 3737.0 3873.7 Others (56.7) (34.7) 0.0 0.0 0.0 Holders of P erpetua l S ukuk 540.0 540.0 576.6 613.2 649.9 CFI (323.4) (321.7) (25.6) (18.1) (18.1) Holders of P erpetua l S ecurities645.2 789.4 834.2 879.1 923.9 MI 6.4 5.3 13.2 23.7 23.7 Net Addition/Rpmt 336.4 297.1 370.8 370.8 419.7 Dividend P aid (117.5) (81.3) (90.4) (90.4) (90.4) Liabilities + Equities 7140.2 6909.4 7162.1 7793.8 8434.7 Others (0.4) (485.1) 0.0 0.0 0.0 CFF 218.5 (269.3) 280.4 280.4 329.4 Ratios 2017 2018 2019F 2020F 2021F E P S Growth (% ) 0.1 (25.0) 8.1 1.6 3.4 Net Cash Flow 261.0 46.2 935.4 516.4 550.9 PER (x) 7.4 11.8 10.6 10.4 9.9 GDPS (sen) 6.5 4.5 5.0 5.0 5.0 Div Yield (%) 7.0 4.8 5.3 5.3 5.3 Net g ea ring (% ) 3.0 Net Ca sh Net Ca sh Net Ca sh Net Ca sh ROE (%) 9.0 5.5 6.0 5.9 6.0 Assumptions 2017 2018 2019F 2020F 2021F ROA (%) 4.5 2.7 3.0 2.9 2.8 Sales Assumptions 1724 1503 1520 1610 1690 NTA (RM) 1.4 1.4 1.5 1.5 1.6 Prop Dev Margins 17.1 15.1 16.5 16.6 17.0 P/NTA (x) 0.7 0.6 0.6 0.6 0.6

Stock Recommendation Guideline BUY : Total return within the next 12 months exceeds required rate of return by 5%-point. HOLD : Total return within the next 12 months exceeds required rate of return by between 0-5%-point. SELL : Total return is lower than the required rate of return. Not Rated : The company is not under coverage. The report is for information only.

Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.

Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this documen t. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.

As of Friday, March 29, 2019, the analyst, Thiam Chiann Wen, who prepared this report, has interest in the following securities covered in this report: (a) nil

Kaladher Govindan – Head of Research

TA S ECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad

Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my

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